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Dec 22, 2011, 04.30 PM IST | Source: Moneycontrol.com

I have sold a house; do I have to pay tax?

ANSWERS to common questions on capital gains tax on your property sale.

I have sold a house; do I have to pay tax?

ANSWERS to common questions on capital gains tax on your property sale.

What is long term and short term for a house property?
If you own a property for more than three years, it will be treated as a long term capital asset. If you sell it before three years, the gains will be short term capital gains.

How is profit or capital gain calculated?
Capital gain = Sale value minus indexed cost of purchase

Indexed cost of purchase is the cost of buying the property adjusted to inflation. Indexed cost is calculated with the help of a table of cost inflation index that is provided by a notification in the official gazette each year. These are the latest indices.

Financial year

Cost Inflation Index

1981-82

100

1982-83

109

1983-84

116

1984-85

125

1985-86

133

1986-87

140

1987-88

150

1988-89

161

1989-90

172

1990-91

182

1991-92

199

1992-93

223

1993-94

244

1994-95

259

1995-96

281

1996-97

305

1997-98

331

1998-99

351

1999-00

389

2000-01

406

2001-02

426

2002-03

447

2003-04

463

2004-05

480

2005-06

497

2006-07

519

2007-08

551

2008-09

582

2009-10

632

2010-11

711

2011-12

785

What tax do I have to pay?
If you have sold your house that you lived in, for a profit, you will get an exemption on tax, if you fulfill certain conditions. The conditions are:
1. You should have owned that house for at least three years.
2. Once you sell the house, you should buy a new house within two years from the date of sale. Alternatively, if you have bought a new house within one year before the sale of the existing house, you will be eligible for tax exemption. If you are constructing a house, then you should do so within three years from the date of sale
3. The cost of the new house should be at least equal to the capital gain.

What if I donít buy a new house?
If you donít buy a new house, you would have to pay tax. If it is a long term capital gain, you will have to pay tax at 20 per cent. If it is a is short term, you would have to add the gains to your total income and calculate tax according to your tax slab.

I have sold my second house. What are the taxes?
If you sell your second house and want to save the capital gains tax, then you must invest the entire sales proceeds in bonds of NHAI or REC. And you must do so within six months.

 

 

 

 

 

 

 

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