If you want to sell your house property there are certain income tax implications that will help you to save your tax and help to build a better decision about selling your house.

1. If a property is sold within three years of buying it, any profit from the transaction is treated as a short-term capital gain and added to total income of the owner of such house house property.

2. If you sell after three years, the profit is treated as long-term capital gains and taxed at 20% after indexation.

3. There is no tax to be paid if you use the entire gain from the transaction to buy another house within two years or construct one within three years. However, the entire tax exemption will be reversed if the new property is sold within three years of purchase or construction.

4. If you are not locked your gain in investing another house then you can invest You can claim exemption under Section 54 (EC) by investing the long-term capital gains for three years in bonds of the National Highways Authority of India and Rural Electrification Corporation Limited within six months of selling the house. (invest only up to 50 lakhs in P.F.Y)

5. sellers also have the option of investing the entire long term capital gain in a tech. driven start-up (certified by the Inter-Ministerial Board of Certification) to get relief from tax

6. you can set off these long term capital gains against any previous year long term capital loss as well as short term capital loss for the sale of other long term capital assets. These losses can carry forward up to 8 years. However your short term capital losses can only be setoff against short term capital gain.

7. If a buyer buys a house more than 50lakhs then he has to deduct TDS @1% before making any payment to seller.

8. If you are unable to reinvest the gains in another house or bonds before filing your tax return for the year in which the sale took place, deposit the balance in the Capital Gains Account Scheme so that you are eligible for the deduction.

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One Comment

  1. https://taxguru.in/income-tax/selling-house-tax-implications.html#pcomments

    The articles on the selling house tax implications it’s very contented and very elegantly written by yougesters.

    On this point I would have contacted more 25 qualified experienced CA professionals and ADVOCATES the following question but unfortunately no one able to give reply .

    Where it has been mentioned construction compulsary to registered under stamps act and registration act for claiming long term capital gain on sale of apartments

    “Where it has been mentioned construction compulsary to registered under stamps act and registration act for claiming long term capital gain on sale of apartments

    SRSUBRAMANIAN: The issue under consideration is whether the exemption u/s 54 can be denied only with the reason that the constitution agreement not registered
    [21/01, 08:39] SRSUBRAMANIAN: Capital gains from the sale of a house property may be claimed as exempt from tax when they are invested for the purchase or construction of another house property. This exemption has been laid down under Section 54 of the Income-tax Act
    [21/01, 08:40] SRSUBRAMANIAN: If the entire capital gains earned are not invested, the balance uninvested capital gains shall be taxable at 20% after allowing for indexation of the cost of acquisition
    [21/01, 08:40] SRSUBRAMANIAN: Capital gains from the sale of a house property may be claimed as exempt from tax when they are invested for the purchase or construction of another house property. This exemption has been laid down under Section 54 of the Income-tax Act. The benefits of this section are also available to NRIs. To be able to claim this exemption, you are required to invest your capital gains. If the entire capital gains earned are not invested, the balance uninvested capital gains shall be taxable at 20% after allowing for indexation of the cost of acquisition. Therefore, there is no restriction on how much you can invest.
    [21/01, 08:41] SRSUBRAMANIAN: any capital gains that remain uninvested shall be taxed at 20% after allowing for indexation.
    [21/01, 10:54] SRSUBRAMANIAN: the intended buyers book the property rights and advance payment for booking is made. Further, payments are made to the developer as and when demanded and also with the progress in the construction. Possession of the property is made available to the intended buyers after 3-4 years of the booking and may be sometime even longer period
    [21/01, 10:56] SRSUBRAMANIAN: the intended buyer has acquired the rights as soon as he has given the initial advance though specification in regard to project / property are not available.
    [22/01, 00:46] SRSUBRAMANIAN: whether agreement for construction needs registration under registration act
    [22/01, 00:48] SRSUBRAMANIAN: whether agreement for construction needs stamp duty to be paid under karnataka stamp act or not.

    On Fri, 14 May, 2021, 11:56 sr subramanian, wrote:
    https://taxguru.in/income-tax/date-sale-claiming-exemption-section-54.html

    I have just gone thru your article in tax guru.

    I am hvg my soninlaw’s mater income tax regarding LTCG deposit closure of capital account where issue NOC delayed and sequences of notices being received under sec 142, 143,147,148,281B etc in stead of NOC to close the deposit.

    Will you be able to advise if I forward all the notices.
    Any CBDT circular is there.
    Any settled case law saying that construction cost for the apartment Is not necessary espicially in karnataka state stamp act and regulations act on govt fixed guidence value.

    In this regard even TaxGuru unable give any clues

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