- By Aditya Pratap Singh
- Tue, 20 Feb 2024 03:45 PM (IST)
- Source:JND
Tax Saving On House Sale: If a person is selling his house after two years from the date of purchasing, the gain on it will be considered as the long-term capital gains (LTCG). The Income Tax Department taxes LTCG at a flat rate of 20 per cent. But a citizen can claim indexation benefits if you sell your house within a short period.
A person selling a house within 2 years has many investment opportunities to save tax on the sale amount. To reduce or eliminate the tax burden on LTCG, you can take recourse to the provisions of Section 54 of the Income Tax Act for purchasing or constructing a new house. Below are investment measures to save tax.
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Buying or building a new home
If you earn LTCG by selling a residential house only after 2 years, you have the option to buy a new residential house to save tax. The amount spent on purchasing or constructing a new house can be claimed as an exemption for LTCG under Section 54 of the income tax rule. In this way, your entire taxable amount will come as a return.
Keep the time limit in mind
According to the law, the new house should be acquired within one year before selling the old property, only then it will come under the provisions of tax exemption.
If the investment is made in two residential house properties, tax exemption can be claimed under section 54. Earlier, tax exemption was given only on purchasing a single property. But after the change in rules, exemption will now be available for investment made in two residential house properties. To avail exemption on investment in two houses, under the condition that LTCG should not exceed Rs 2 crore.
Deposit in capital gains account
If you are not able to invest your LTCG before the due date of filing returns and if the prescribed income tax rules deadline has not expired, you can invest the sale proceeds in a capital gains account. You can open this account in any public sector bank or any other bank notified under the Capital Gains Account Scheme, 1988.
