Today, everyone is thinking about save capital gain tax on property . You have been told easy ways to save gain tax, due to which you can save capital gain tax on selling your house. There are new rulings in capital gains tax from such angles; also know about the changes in them.
In India, you can save capital gains tax on the sale of residential property by taking advantage of certain provisions under the Income Tax Act.
Investment in a New Residential Property
- Under Section 54 of the Income Tax, if you sell any property, you have to pay tax on the profit made from it, which is called capital gains tax. To save it, you should re-invest in a new resident property.
- To avail the full exemption, the property recovered from the sold property should be invested. If we invest the same part of the profit in buying a new house, then there is no income tax exemption on that part.
- The new property should have been purchased a year or two ago.
- If you are buying a property, then it takes one or two years, but to buy the old one by selling it, this process should be done within three years.
- It is important to keep in mind that even if you sell the new place before 3 years, you will have to pay capital gains.
Construction of a Residential Property
The same rules will be applicable in this scheme: if you do not buy a new property or want to develop the property yourself, then you will have to spend a certain time period, and if it is within that, then you will not have to pay any tax; otherwise, you will have to pay tax.
Capital Gains Account Scheme (CGAS)
If you feel that this price is too high and will be useful in the future, then you do not want to buy and you are unable in any way to buy a new one. That is why you have a bank account in which you do not have to pay gain tax, but in the future, if you cannot buy a property that has a certain time period, you have to buy it within that period; otherwise, you will go out of the tax-saving criteria.
Investment in Bonds
If you want to save from capital gains tax, the easiest way is to invest in investment bonds, which are issued by the government. Bonds like Nhai and Rec work on roads and other infrastructure in India, and you have to invest in them within a year. When the bond gets a low rate of interest as per the financial year, it is three years, and the maximum value of the bond is as per the financial year, and this is the maximum safety here that your money is guaranteed return.
Exemption for Long-Term Capital Gains
If you own the property for two years, only long-term capital gains tax will be charged on it, which is the most useful in comparison to short-term capital gains tax.
You can easily avoid long-term capital gains tax by purchasing a new property.
Joint Ownership
If you bought a property in two joint partnerships and are now selling it, then you have to pay capital gains tax as per the percentage of your partnership. Similarly, you also get an exemption if you buy a new property on that portion, on which you do not have to pay tax. engaged
Gift to Family Members
In a family gift, you have to sell the amount of property sold by you among the people, like your son or spouse. You will get a rebate on it from all the members, and you can save your capital by reinvesting it.
You have been told all the ways in which you can save tax, but these methods also change every year as per the financial law; hence, you should also talk to the financial advisor about the capital gain so that you can save your tax accordingly.
How much capital gain is tax-free on property?
In India, if you invest in any property equity for more than 2 years and get a profit on holding, it is not possible for you to definitely get a capital gain on it, but you can save by following the methods mentioned below.
Therefore, you should talk to your charter accountant so that you can get the right advice and save on your taxes.
How do I pay taxes on the sale of property?
- To pay your capital gains tax, you will first have to calculate the inflation rate as per your income tax and what capital gain you are getting as per your calculations.
- You have to know your holding period, long-term and short-term, how much tax is payable, and how much profit you got on your investment during this period. From then on, you will have to pay tax or you can reinvest.
- If the asset is held for more than two years, long-term capital gains tax applies. As per my last update, the long-term capital gains tax on property is 20% with an indexation benefit.
- You can reduce that falling profit by claiming it and reinvesting it. For this, you will have to file a regular return in April every year, and you will also be able to get a TDS return by filing income tax every year, in which you will have to maintain your documents. If in your document, If something is missing, a query will be raised and you will have to answer it.
What is the new rule for capital gains tax?
The new rule became effective on April 1, 2023.
According to the latest finance law change, if debt funds are bought after April 1, 2023, and sold after three years, the profit earned by the owner be counted as short-term capital gains and added to taxable income. Now these were considered long-term capital gains, and after indexation, tax was taken at . approximately 20 percent.