Hello and welcome to Part 9 of the Income Tax education series brought to you by H&R Block, the global leader in filing Income Tax Returns.
Today we will understand how sale of house property can affect your taxes.
If you sell your house property you might be liable for capital gains tax on the amount of profits you earn on the sale. Apart from this if you sell your house within 5 years of purchase then the tax benefit claimed under section 80C for principal repayment will be reversed and added to the income of the year when the sale takes place. This is because the deduction for principal repayment is available only on the premise that the house will not be sold within 5 years from date of purchase.
Example: Suppose Meeta bought a house in January 2012 and wishes to sell it in January 2016, the total period of holding the house is only 4 years. If Meeta has claimed a total of Rs. 2,00,000 as principal repayment deduction from her taxable income for the last 4 years then this amount will be added to her income for FY 2015-16. Hence the income for this year will increase by Rs. 2,00,000 even when Meeta has not earned it and tax liability will also be higher.
One should therefore be very careful while making decisions for sale of property and take into account the tax implications in order to minimize taxes.
At H&R Block we always provide a proactive advice on all such tax matters so that you pay minimum taxes and avail the maximum eligible deductions.
I hope you found this useful. If you have any further questions on this topic, please feel free to ask us using #AskBlock.