Capital Gains Tax on Sale of Property | Save Tax on Sale of Residential House [2019] | Taxpundit

The Income Tax Department has inserted certain exemption provisions for those who have a dream to buy their own house or a bigger house than the existing one.

Capital gains are simply profits earned or losses incurred on disposing of a capital asset. Capital gain arises when a house property is sold for profit. However one may also incur the loss, say if a property is sold at a price less than its acquisition cost one may incur a capital loss as well.

Ordinarily sale consideration means agreement value for which the house is sold and any other consideration received over and above the sale consideration less any other selling expenses incurred directly for selling the property for example Brokerage etc.

The cost of Acquisition means the buying price of the house property as mentioned in the sale agreement.

The cost of Improvement means any cost incurred for major repairs or alterations to the house property.

However in order to give the benefit of inflation to the purchase price, the IT department allows indexation on the purchase price. Indexation is yet another method to arrive at the real price of the property as on the year of sale. Index figures are published by the government for every financial year. The taxpayer has an option to claim indexation or to forgo the same

Section 54

This is the section for availing tax benefit on long term capital gains arising from a residential property. Under this section if a residential house is sold after three years of purchase then one can avail tax exemptions on the gains by investing them in following options –

A new residential property either bought within two years or constructed within three years from the date of transfer of existing property. In the case of buying a new property, the exemption is available even if it is bought within one year before the date of transfer.

There might be a situation when you would not have decided on a new property but do not want to lock in the money in the bonds. In such instances, the money has to be deposited in a Capital Gains Account Scheme.

The entire capital gains will be exempted where the amount of investment in new property is equal or greater than the capital gains earned.

One of the larger benefits of Section 54 is that one can hold a number of properties as on the date of transfer and still claim exemption on the gains.

If the new asset is not acquired up to the date of submission of return of income, then the tax payers will have to deposit money in “Capital Gain Deposit scheme” with a nationalized bank. The proof of deposit should be submitted along with the return of income. On the basis of actual investment and the amount deposited in the deposit account, an exemption will be given to the taxpayer.

In this video we have covered long term & short term capital gains on sale of residential house property and deduction u/s 54. If you like the video please like and subscribe our channel.

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Download Link for Cost Inflation Index as notified by CBDT dated 05.06.2017 : https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Misc/Notifications/TPR-N167.pdf

Financial Year CII Number
2001-02 100
2002-03 105
2003-04 109
2004-05 113
2005-06 117
2006-07 122
2007-08 129
2008-09 137
2009-10 148
2010-11 167
2011-12 184
2012-13 200
2013-14 220
2014-15 240
2015-16 254
2016-17 264
2017-18 272
2018-19 280

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