Income Tax New Rules: Before selling property, know the income tax rules, know how you can save...

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According to Section 54 of the Income Tax Act, if you sell a house and spend the proceeds to buy another house within the stipulated period (purchase within 2 years or construction of a new property within 3 years), then You can get tax exemption on the property by which you initially earned capital gain by selling it.


Think of it this way
When you bought the house, its price was Rs 20 lakh. Now you are selling it for Rs 42 lakh. You made a capital gain (profit) of Rs 22 lakh. Apart from a 3% surcharge and cess, you will also have to pay 20% long-term capital gains tax on this. However, if you buy another house from the sale proceeds of the old house, you will be exempted from this tax.

You can also take advantage of the Capital Gains Account Scheme
Tax expert Sunil Garg explains that if you do not use the money received from selling the house to buy a new house till the time you file the tax return, then put that money in a special account under the Capital Gains Account Scheme. Still, with that money, you will have to buy a house in 2 years or build a new house in 3 years.

Capital gains tax cannot be saved in these circumstances
     You can get an exemption on capital gains only if you buy 1 house.
     The profit from the sale of the old house cannot be used to buy a new house or sell it until 3 years after the completion of construction. If you sell the new house before the completion of 3 years of purchase/construction, the benefit you availed under Section 54 will be canceled and you will have to pay full long-term capital gains tax.
     You can get an exemption under Section 54 only if you are buying a house in India. You will not get any exemption on long-term capital gains tax on any residential property purchased outside the country.


How much tax is to be paid?
According to Income Tax law, if the property is sold within three years of purchase, then the profit arising from it is considered as Short Term Capital Gain (STCG). This amount of profit made from selling the house or plot will be added to your total income and after that tax will be collected on it as per your tax slab.

If you buy a property and keep it for 3 years and then sell it, the profit you make will be considered as Long Term Capital Gain (LTCG). On this type of income, you will have to pay tax at the rate of 20.8% after the benefit of indexation (property price increases over time).

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