Have a Look at the Tax Implications While Selling a House
May 25, 2017 Legal Guidance
When you plan on selling your house, one needs to keep a track of the calendar as ignoring will not prove to be a bliss in this case. It may lead to payment of a bulky tax. If the property or the house is sold within the time span of three years from purchasing it then the profit or gain from it is considered as short term capital gain of any individual. This gain is added to the total sum of income of the owner and he/she is taxed as per the slab rate. For all the people who earn above Rs 10 lakhs, this shaves off almost 30 percent of profits from sale consideration.
And. If any particular property or house is sold within the time span of five years of the end of the financial year where it was acquired, then the tax benefits claims are not availed which implies that all the benefits that were availed earlier will all be reversed.
Hence it is highly advisable to people that they must hold a house/property for at least a time span of three years because if you sell the property after three years then all your profit is considered as long term capital gain. This is taxed at 20 percent after the indexation. In indexation, the inflation of the period is taken into consideration and this accordingly decides the purchasing rate which helps in slashing off the tax burden of a seller. Not just that, the owner can also avail various other exemptions for long term capital gains, however, no such exemptions are there for the short term capital gains.
One point every seller must know about is that there is no tax that is required to be paid on the profits or gains if all of that profit is used for purchasing another house or property in three years. The only condition is that the house needs to be in the name of the concerned seller.
The government now has made it compulsory for all the buyers to deduct their TDS when they are purchasing a new house or property whose worth is above Rs 50 lakhs. A TDS of 1 percentile of the value of the house or property needs to be deducted prior to making the payment to a seller.
Earlier this amount was supposed to be deposited in seven days from the end of the month where the transaction was conducted. But from the 1st of June, this period is extended to 30 days. The seller, however, can claim for a refund of TDS if she or he incurs a loss on the sale of the property.
Let’s have to look at certain tips and tricks for the house sellers. In case total sale amount is less than the price of the new residential property then exemption happens proportionately. The rest of the amount can be reinvested under the Section 54EC within a period of 6 months.
If a person fails to reinvest the profits into another house/property or bonds prior to filing the tax return for that year in which the sale happened then deposit the balance amount in Capital Gains Account Scheme which makes one eligible for deduction.
And. If any particular property or house is sold within the time span of five years of the end of the financial year where it was acquired, then the tax benefits claims are not availed which implies that all the benefits that were availed earlier will all be reversed.
Hence it is highly advisable to people that they must hold a house/property for at least a time span of three years because if you sell the property after three years then all your profit is considered as long term capital gain. This is taxed at 20 percent after the indexation. In indexation, the inflation of the period is taken into consideration and this accordingly decides the purchasing rate which helps in slashing off the tax burden of a seller. Not just that, the owner can also avail various other exemptions for long term capital gains, however, no such exemptions are there for the short term capital gains.
One point every seller must know about is that there is no tax that is required to be paid on the profits or gains if all of that profit is used for purchasing another house or property in three years. The only condition is that the house needs to be in the name of the concerned seller.
The government now has made it compulsory for all the buyers to deduct their TDS when they are purchasing a new house or property whose worth is above Rs 50 lakhs. A TDS of 1 percentile of the value of the house or property needs to be deducted prior to making the payment to a seller.
Earlier this amount was supposed to be deposited in seven days from the end of the month where the transaction was conducted. But from the 1st of June, this period is extended to 30 days. The seller, however, can claim for a refund of TDS if she or he incurs a loss on the sale of the property.
Let’s have to look at certain tips and tricks for the house sellers. In case total sale amount is less than the price of the new residential property then exemption happens proportionately. The rest of the amount can be reinvested under the Section 54EC within a period of 6 months.
If a person fails to reinvest the profits into another house/property or bonds prior to filing the tax return for that year in which the sale happened then deposit the balance amount in Capital Gains Account Scheme which makes one eligible for deduction.
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