If you happen to sell your property within 2 years of buying it, any profit from your sale happens to be treated as a short-term capital gain. It is added to the entire income of the seller and is taxed according to the slab rate applicable. There are no provisions for any relaxation or rebate except for you can sell it against any short-term capital loss when it comes to investing in stocks or gold.
But, if you decide to sell your property after two years of buying, you are capable of deducting the indexed cost of acquisition from the sale prices to ultimately arrive at a long-term capital gains amount. The cost inflation index is applied for indexation. Apart from that, the consideration so accrued or received as a result of the transfer of residential unit can be adopted for calculating the capital gain, if stamp duty value is up to 120 percent considering the consideration.
As long-term capital gains happen to be taxed at 20.8% irrespective of the tax slab, there are some ways you can save on long-term capital gains tax while selling your property. Let us find out more about it.
The Number Of Properties
With an effect from the assessment year 2021-2022, the taxpayer comes with an option to make investments into residential housing properties within India for claiming exemption under section 54. This alternative can also be exercised by the taxpayer who wants to sell or buy news flats in Kolkata exclusively once during his lifetime, provided the amount of his long-term capital gain does not exceed 2 crores.
Saving LTCG By Investing In 2 BHK Flats In Kolkata
You can save your LTCG if you happen to invest the number of capital gains from the property sale in purchasing and other property subject to particular conditions. You need to buy the house within a year before the date of transfer or two years after that. You can also build a house within three years.
You cannot sell this property within 3 years of buying out instruction. Apart from that, you cannot own more than two residential properties on the date of transfer. Additionally, you cannot purchase another property within two years or build another house within three years after your transfer date.
The property tax relaxation would be reversed if you decide to sell the new property within 3 years of purchasing it. The profit you make on the sale will also be treated as a short-term capital gain. The entire profit amount leads to being reinvested in your new property for claiming the exception of the entire LTCG amount. Failing to do so will lead to an exemption limited to the amount reinvested.
All the connected charges incorporated within the purchase of your new property like registration charge, stamp duty, brokerage charges can be incorporated within the purchase cost of your new property. In a similar manner, any money you spend on renovation and repairs can also be added to your overall purchase cost, thereby computing LTCG.
Thus, it turns out to be essential to consider the impact of taxation before you enter into any property transaction, otherwise, you can face substantial outgo when it comes to the account of taxes.
