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Planning to sell a house? Look out for tax implications

If you are planning to sell your house, time it well. Look out for tax implications before selling your house.

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The article talks about timing the sale of your house. If you are planning to sell your house, then do it at the right time. Failing to do so, you will land up paying huge taxes.

The article suggests that one should hold a property for at least three years. The reason is that if a property is sold within three years of buying it, then any profit arising out of the transaction is treated as a short-term capital gain. The profit is added to the total income of the owner and taxed with respect to the tax rate applicable to him/her.

On the other hand, if you sell your house after three years, the gain from the transaction will be seen as long-term capital gain and it will be taxed at 20% after indexation.

Not only this, the owner can claim various exemptions in case of long-term capital gains, which, is not applicable to short-term capital gains. But, one more thing to keep in mind is that if you sell your house within five years of purchase of the house, then, the tax deduction claimed for the principal repayment, stamp duty and registration u/s 80C are reversed, except the interest payment u/s 24B. And, the amount becomes taxable in the year of sale.

According to Vaibhav Sankla, Director, H&R Block, India, expenses incurred on repairs and renovation can be added to the cost of purchase of the house while calculating long-term capital gains. Moreover, if you haven’t claimed the payment of interest during the pre-construction period, then it can also be added to the cost.

The article further explains how to avoid tax when you sell your house. Apart from this, it also explains how to deal with TDS. The government, to plug tax leaks, has made it mandatory for buyers to deduct TDS when they buy a house priced more than Rs. 50 lakh. Sankla says that the buyer should deposit the amount with the tax authorities on your behalf so that you can claim credit for the payment.

The article has tax tip meant for house sellers, which is of great use.

Source: Economic Times