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Capital Gain on Sale of a House Property


Taxability of gain/profit on sale of a house property is determined on the basis of holding period of that property. Holding period of an asset simply means the time period from date of purchase of the property till the date of sale of that property. In other words we may also say, the time period for which an asset was the property of the person/owner is called the holding period of that asset. 
  • Short Term Capital Gain on Sale of House: 
From Assessment Year 2018-19 when a house property is sold within 2 years of its purchase, the gain/profit on such sale of house will be short term capital gain. Short Term Capital Gain is added to the total income of the assesse & will be taxable as per the normal tax slab rate applicable. Till now there is no provided scheme of investment to save short term capital gain tax on sale of house property,
  • Long Term Capital Gain on Sale of House:
From Assessment Year 2018-19 when a house property is sold after 2 years of its purchase, the gain/profit on its sale will be Long Term Capital Gain. Long Term Capital Gain on sale of a house property is taxable at fixed rate of 20%. Benefit of indexation of cost of acquisition of house property is also available. In a nut shell selling a house as a long term capital asset is tax efficient and beneficial to the owner.

Further there are some investment options which enable exemption from the long term capital gain on sale of house property. Investing the capital gain in specified assets is recommended to save tax on long term capital gain.
Following two exemptions are provided by Income Tax Department from Long Term Capital gain on sale of a House Property:

Under Section 54 - By investing in a new house property:

Section 54 of the Income Tax Act provides exemption from Long Term Capital Gain on sale of a house if a new house property is purchased or constructed within one year before or two years after the sale of property.
Click here to read about Section 54 in detail



Under Section 54EC - By investing in certain bonds:
Another possible exemption from LTCG on sale of a house property is provided in Section 54EC of the Income Tax Act. Investing the amount of LTCG within six months of transfer in the specified bonds provides for exemption from long term capital gain subject to specified limits.
Click here to read about Section 54EC in detail

Download LTCG calculator in Excel

How to Calculate Fair Market Value of House purchased before April 2001?

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