Introduction:
If you are planning to sell a property in India, it is essential to understand the tax implications involved. This article addresses common questions related to taxation on property sales, including long-term capital gains (LTCG), short-term capital gains (STCG), deductions, and tax-saving options.
Determining Capital Gain/Loss:
As per Indian tax laws, the holding period of an immovable property is crucial in determining whether it qualifies as a long-term or short-term capital asset. If you hold the property for more than 24 months, the gains or loss on its transfer are treated as LTCG/L. In contrast, if the holding period is less than 24 months, it is considered as STCG/L.
Under-Construction Property Considerations:
For properties acquired in under-construction projects, there is an ongoing debate regarding their classification as capital assets. Some argue that until construction is complete and possession is granted, the property does not exist as an immovable asset. In such cases, if you sell the right to receive the asset before 36 months, it will be treated as LTCG/L. However, if the sale occurs within 36 months, it should be considered as STCG/L.
Deductions Allowed for Capital Gains/Loss:
When calculating capital gains or loss, the following deductions are permitted:
- Expenditure incurred wholly and exclusively in connection with the transfer.
- The cost of acquisition of the asset.
- The cost of any improvement made to the property.
Inclusion of Home Loan Interest and Commission Paid:
The inclusion of housing loan interest in the cost of acquisition is a subject of interpretation and open to debate. It’s important to note that starting from FY 2023-24, the cost of acquisition will not include housing loan interest claimed as a deduction from house property income.
If you have paid commissions to builders or agents, it can potentially be considered as part of the cost of acquisition. However, it is crucial to have receipts as proof of payment that acknowledge the transfer of funds to the recipients.
Tax Saving Options for STCG:
In the case of STCG, there are limited tax-saving deductions or exemptions available apart from those mentioned above for the computation of capital gains.
In conclusion, understanding the taxation aspects of selling a property is crucial to ensure compliance with Indian tax laws. Seek guidance from a tax professional or consultant to navigate the complexities and optimize your tax liability.
Disclaimer:
The information provided in this article is based on the latest Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and other applicable material available at the time of compilation. We have diligently ensured the completeness and accuracy of the material. However, it is essential for users to consult the relevant legislation for specific guidance. Please note that the data provided may be subject to change without prior notice and should not be considered as professional advice. Estabizz Fintech holds no liability for any outcomes resulting from the use of this material.
