Tax rules when selling a flat with furniture: What homeowners should know

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Why furniture selling with a flat needs extra attention

When you are selling a flat, the computation of capital gains tax is normally straightforward—it is the sale consideration less the indexed cost of acquisition and improvement. But when you are selling the property with furniture, fixtures, or appliances, what you are selling is no longer just immovable property. Furniture and other movable properties are treated separately under the Income Tax Act, and this could affect the computation of your tax charge.

How movable and immovable assets are treated separately

An apartment is a real asset or immovable asset, and the gains on its sale are taxed as capital gains—short-term or long-term depending on the holding period. Furniture is a movable asset. If you have used the furniture for private consumption, the gain on its sale is not taxable in general. But if the furniture constitutes part of your business assets (for instance, if the flat had been let as a fitted flat), profits may be taxed as trading profits or capital gains, depending on conditions.

Making the sale agreement properly

If you are to sell your flat accompanied by furniture, you should make the agreement of sale correctly. The value of furniture and the flat must separately be specified in the sale deed. In this way, you will not pay unnecessary stamp duty on the value of movable assets and you will have clarity in taxation treatment. Failing to maintain the values separate can result in the total amount being taxed for property-based duties and taxes, and this will cost you more.

Stamp duty and registration issues

Stamp duty is imposed upon the transfer of immovable property but not upon moveable property like furniture. By devaluing and valuing the furniture separately and in detail in the agreement, you can ensure that stamp duty upon the price of the flat alone is levied. You can save huge amounts of money, especially in high-cost deals. But the valuations should be realistic to avoid trouble with the tax department or the registrar's office.

Documentation and valuation best practices

Maintain a record of the sold furniture, fixtures, and appliances along with their photos and purchase bills, if existing. If very old, the reasonable depreciated amount can be noted in the sale deed. Over- or under-valuation of the furniture can attract suspicion under income tax inquiry, so ideally obtain professional valuation if the values are significant.

FAQs

Q1. Is second-hand home furniture taxable on sale?

If for domestic use, proceeds from second-hand home furniture are exempted from tax. But if sold from business or commercial establishment, it can be taxed.

Q2. Does furnishing flat sales increase stamp duty?

Yes, unless itemised separately. The entire sale consideration can be subjected to stamp duty. Separately valuing them can avoid this.

Q3. Am I required to provide invoices for second-hand furniture?

Not always, but a purchase invoice or valuation report can help to substantiate the declared value in the event of query by customs officials.