Buying and selling a house property not only involves a huge amount of money, but prevailing market price and personal choice also matter. So, it takes a lot of time to select and buy a house and also to get a proper buyer to sell one.
Not only for getting a suitable buyer, you need to wait even for saving taxes on capital gain, if any, on selling a house property.
This is because, if you sell a property within two years from the date of purchase, the capital gain, if any, is treated as short-term capital gain (STCG) and is added to your taxable income. On the other hand, if you sell a house after two years from the date of purchase, the gain, if any, is treated as long-term capital gain (LTCG) and is taxed at a flat rate of 20 per cent and that too after getting indexation benefit.
“When the price of a property appreciates, there is a capital gain. The profits from the sale of property held as an investment for the short-term are taxed as per the regular income tax slab rates. According to the law, the gain on a capital asset held for less than 24 months is considered a short-term capital gain (STCG),” said Archit Gupta, Founder & CEO, Clear.
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“However, if you hold the property for more than 24 months, the profit is treated as long-term capital gains (LTCG) and taxed at 20% after indexation. Indexation means adjusting the purchase price with the inflation and thereby reducing the figure of capital gains for the seller. For LTCG, there are other benefits too. The seller can claim exemptions of LTCG, but such benefit is not available if there is a STCG,” he added.
However, like in the case of LTCG, in case of STCG also you can claim the capital expenditures made for addition and or alterations in the house as addition to the cost of the house. Also, the expenditures made solely in relation to transfer of the property may be claimed as a deduction while calculating the capital gain.
“Even the STCG on sale of a property may be adjusted against short-term losses from redemption of equity shares, mutual fund (MF) units, etc,” said CA Karan Batra, Founder and CEO, CharteredClub.com.
