10 thoughts on “What Are The Tax Implications While Selling A Property?”

  1. Hi,\r\n\r\nIf the property having ‘A’ Khata is sold and another property purchased having ‘B’ Khata, is the benefit on capital gains still applicable.\r\n\r\nPlease clarify.\r\n\r\nThanks in advance.

  2. Request you to throw some light on the following.\r\nWhat are the rules if the property is sold after 35 years of initial purchase?

    1. Hi Venkat\n\nIf the property is sold after 35 years, then it will attract long term capital gains tax on account of appreciation. Capital gain is the difference between the cost of purchase and your price of sale. However, it is not a simple difference because the cost of purchase is indexed to inflation over the years and then the difference is computed. Further the cost of repairs, modifications, improvements which are supported by bills including betterment charges if paid to government can also be added to the cost.\n\nIf you invest the capital gains based on this computation into another property or invest into long term capital gains bond then you can completely avoid any tax. If the computed value is a loss, you can take it forward in your IT returns as capital loss and offset it against capital gain of the same kind in future. If the computed value is a gain and you are not reinvesting into another property then you will have to pay tax @ 20% on the gain.

    1. And what if it is an agricultural land?\r\nBasically if an agricultural land is bought and sold within 36 months what will be the tax to be paid in the following conditions\r\na) Sold at the same price\r\nb) Sold at a lesser price\r\nc) Sold at a profit

      1. Hi Vishal,\n\nFor agricultural land, there is no capital gain tax involved. However, we suggest you to consult a reputed Chartered Accountant on this.

  3. When we say three years from purchase what does this mean. Three years from registration or 3 years from possession?\r\nAlso is there a clause which says that if property is sold before 5 years, then all the tax benefit which one gets for principal and interest of home loan will have to be paid back?

    1. Hi Dhruv,\n\nThere is always a debate about the technicality of the date of purchase. When you are buying an under-construction flat and you enter into a sale agreement (which technically accrues the rights of the flat to you) or get a allotment letter (in the case of BDA / State Housing Board), then that can be considered as the date of purchase though you are handed over possession much later. Usually possession comes after registration, though there are instances where the possession is given before registration for technical reasons where you are unable to complete a registration immediately.\n\nIf you are buying a completed flat or house that is already built then the date of registration which transfers the title to you should be taken as the date of purchase.\n\nYes, if property is sold before 5 years then the tax deductions you may have availed previously under sec 80C will have to be repaid.

  4. Q regarding Sale of Property\r\n\r\nMy grandfather purchased the flat in 1980 at pune area 800 Sq Ft, \r\nflat was transfereed in my name by will in 2002, \r\nNo in 2015 i am planning to sell the flat at 4900 pq ft \r\n\r\nKindly suggest how to calculate my tax liability since i dont have purchase cost. \r\n\r\nFURTHER is there any rebate available on flat purchased before 1985? and can that be applicable in my case?

    1. Hi Gaurang\n\nThe applicability of capital gains tax to this transaction is what needs to be looked into. The gain is calculated as the difference between the acquisition cost and the sale value. Since you got the flat and have retained it for more than 3 years, hence it will be treated as an asset held long term (long term capital gains) and indexation is allowed for computation of tax. Indexation is the concept of applying an inflation factor as published by the RBI to arrive at an indexed cost of acquisition and then subtracting it from your sale value, in very simple terms.\n\nBut you acquired this property through a will and did not pay any sum, so how do you arrive at an acquisition cost? So in this situation the cost of acquisition is deemed to be the cost at which it was acquired by the previous owner (the grantor of the will) in the year it was bought and then indexation is to be applied.\n\nThere are other costs like transfer expenses (will transfer), cost of improvement (if you have done any improvements after you got it) that can be deducted before capital gains is computed.\n\nIt is pretty straight forward for chartered accountants to compute capital gains. Please approach a good CA when you are done with the transaction and have it handled. Additionally, if you reinvest the entire proceeds into another property or construction of a property in India within a certain time period, then capital gains tax is exempt completely.

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