Taxpayers can save the taxes on the gains by availing the benefit of tax exemptions allowed under the Indian tax laws.
Investments
in real estate are borne out of savings made out several years of
earnings. These investments have both monetary value and emotional
value for investors.
Individuals buy and sell real
estate to reinvest in upcoming real estate projects, to meet
growing family needs, to move to another location of choice etc.
Since real estate investment involves a large amount of money, the
sale of property results in large gains. Tax may have to be paid on
these gains unless they have been invested. Let’s find out how to
save tax on sale of a property.
Taxpayers
can save the taxes on the gains by availing the benefit of tax
exemptions allowed under the Indian
tax laws. The law allows a taxpayer to invest in real estate and
avail the benefit of exemptions on taxable gains realised on the sale
of assets or real estate.
A.Tax
saving exemptions:
I.Investment
in real estate upon exit from a real estate property
Individuals
who have earned gains upon exit of a residential house and wish to
reinvest in another residential house can avail of an exemption from
taxation of the capital gains.
For
example:
Mr
A sells his residential house on 5th April 2018 for Rs 50,00,000. Mr
A had bought the house for Rs 20,00,000 on 25th March 2013. With the
proceeds of the house, Mr A purchases a new residential house for Rs
60,00,000.
To
claim this exemption the property which is sold should have held by a
taxpayer for more than 2 years.
The
above exemption is now extended w.e.f 1 April 2019 to investment in 2
residential properties (once in a lifetime benefit), the one
condition being that the gains are not above 2 crore rupees.
II.Investment
in real estate upon the sale of any other asset
Individuals
who have earned gains upon sale of any other asset and desire to
invest in a residential house can avail an exemption from taxation of
the capital gains. Other assets would include land, gold etc.
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