Residential House Sale and Purchase in Panchkula

How to Save Tax on Sale of Residential Property? – Jai Maa Property

Possession of real estate offers security and serves as a long-term investment.

Residential House Sale and Purchase in Panchkula and Selling a property at a high price feels great and brings profit to the owner. 

Many people are unaware that any profit from the sale of a property is subject to taxation.

The following advice will help you avoid or reduce tax on the sale of a property.

Before looking at ways to reduce taxes, let’s first understand what factors affect tax liability.

Property holding period: The length of time you hold onto a property before selling it is a crucial determinant of your tax liability.

A capital gain is a profit made from selling a piece of property.

Short-term capital gains (STCG) and long-term capital gains are two categories of capital tax gain that are computed based on the holding period.

Gains from Short-Term Investments (STCG)

A property is referred to as STCG if you have owned it for less than 24 months. 

The tax that applies is the ordinary income tax that you are required to pay under your tax bracket.

Capital Gains: Long-Term (LTCG)

If you have owned the asset for longer than 36 months, it is applicable. 

In India, a seller must pay roughly 20% of the profit made from the sale of a property based on their income and tax filings. 

Under LTCG, taxpayers are eligible for a variety of rebates.

Tax-saving advice for real estate sales:

You may be able to avoid paying taxes on the sale of a property if certain conditions are met.

When compared to the STCG, the LTCG is subject to less tax. Under various sections, the seller may be eligible for capital tax exemptions on LTCG.

Under Section 54, exemption:

Individuals or Hindu Undivided Families (HUFs) who sell their old property in order to buy a new one are eligible for an exemption. 

According to a recent amendment, only if the LTCG does not exceed INR 2 crore in cases of construction or repurchase can two residential properties be exempted lifetime under section 54. 

The following requirements must be satisfied in order to claim exemptions under Section 54:

  • The building should be a residence and be covered by LTCG.
  • Any number of properties could be owned by the seller.
  • Within two years of selling the previous home or no later than one year after doing so, the seller must buy a new home.
  • For construction, a 3-year window is provided.
  • The newly acquired home must be in India.

If you sell the new home you’ve bought within three years, the exemption will expire and you’ll have to pay STCG taxes on the gain from the sale.

Exemption under Section 54EC: Within six months of the sale of a property, the seller who sells the building or land and invests the proceeds in certain bonds may be exempt under Section 54EC.

Among the bonds that fall under the purview of section, 54EC are those issued by the National Highways Authority of India, Rural Electrification Corporation, and Railway Finance Corporation.

The maximum amount that may be invested is INR 50 lakhs, and these bonds pay an annual interest rate of 5.25%. This bond has a five-year lock.

Exemptions under Section 54F: 

People who sell their land or plot in order to buy a new one are eligible for an exemption. 

Section 54F only permits the exemption of one residential property

The following requirements must be met in order to qualify for exemptions under Section 54F:

  • It should be an Indian property.
  • There should only be one property owned by the seller (other than the new one).
  • Before selling the plot or within two years of selling the land, the seller should buy a house. For construction, a 3-year window is provided.

You may still be eligible for tax exemptions under the aforementioned sections even if you invest in some unfinished projects and the developer is unable to give you possession by the due date.

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