Sell your home, save tax

YOU bought a property purely as an investment. Now, you want to sell. But don't forget about the tax you need to pay on capital gains.

Don't fret, yet. There are several ways to tackle capital gains and the tax payable. First, let's break down the jargon and understand what these basic terms mean.

Short-term capital gain: If you are selling a property that you have owned for less than three years, it will be treated as short-term and added to the income of that year. You will then pay tax depending on your tax slab.

Long-term capital gain: If you have owned the property for three years or more, the property can be classified as a long-term capital asset and the tax rate would be 20 per cent, after indexation. There are tax exemptions available on the long-term capital gains you make. In this case, your options to save tax would be:

You are eligible for tax relief if you buy another house within two years of the sale, and the capital gains made to the extent of the amount invested in the new property, is exempt from tax. The remainder, if any will be taxed at the long-term capital gains tax rate.

Invest in capital gains bonds issued by the Rural Electrification Corporation or National Highways Authority of India within six months from the date of capital gains.

Note: There's a ceiling of Rs 50 lakh per person within a financial year for such investments. There's also, an overall limit on the institutions issuing these bonds, which are available only on a first-come, first-serve basis.