If you plan to sell your house you must know
there are ways to save your capital gains tax Ashiwni Kumar Sharma
For many of us, a housing loan’s equated
monthly instalment (EMI) is a prominent part of the household cash flow. While
the EMIs certainly leave less at your disposal, they also help you save taxes.
Mint helps you understand the various tax deductions on your housing loan.
And if you plan to sell your home you must
know there are ways in which you can save your capital gains tax as well.
Let’s take a look at these.
On
buying a house... !
When you buy a house, you also incur many
incidental costs such as brokerage, stamp duty and registration fee, and even
the cost of shifting.
If you have taken a housing loan, there is
also the interest to take care of. Just so these incidentals don’t discourage
you from buying a house, remember that some of the expenses qualify for a tax
deduction.
The amount you pay as stamp duty for
registration of a property can be claimed as deduction under section 80C of the
Income-tax Act. Stamp duty is a percentage of fees charged by the state
government on the property value. It varies from state to state, and in some
states it is lower for women.
For instance, in Delhi, the stamp duty is 4%
if the property is registered in the name of a woman, and 6% in the case of a
man. In Tamilnadu, the stamp duty is 8% for all.
Besides stamp duty, you can also claim
deduction for repayment of home loan. Your EMI can be broken down into two
components: principal and interest. The amount paid as principal repayment
qualifies for deduction under section 80C, now with an overall limit of Rs.1.5
lakh, whereas interest portion qualifies for deduction under section 24(b).
In case of a self-occupied house, you can
claim a deduction on the interest up to Rs.2 lakh from this financial year, and
if your house is rented out, then the entire interest due becomes deductible.
On selling house..!
If you sell your house for an amount more
than what you paid when you purchased it, which is typically the case, the
gains arising from this sale is considered as capital gains and it attracts
what’s called capital gains tax.
Income & gains from property is computed
under the income tax head ‘income from house property’.
As per tax laws, capital gains tax on
property varies depending on the period of holding the assets—short-term
capital gains tax (STCG) and long-term capital gains tax (LTCG). Any gain from
transfer of a property that was held for less than three years is considered as
STCG, whereas gains from property held for three years and more is considered
as LTCG.
STCG is taxed at the marginal rate whereas
LTCG is taxed at the rate of 20% with indexation.
However, LTCG from the sale of a residential
property is exempt under section 54/54F from tax if the gains are reinvested in
another residential property within a period of one year before or two years
after the date of transfer of the property. In case of an under-construction
property, the construction needs to be completed within three years from the
date of transfer of the older property.
Besides reinvesting in a residential
property, an assessee can also save tax on LTCG arising out of property sale by
investing the gains in specified bonds under section 54EC of the Income-tax
Act, 1961.
Do keep in mind, however, that you have to
invest the capital gains in capital gains bonds (specified bonds) within six
months from the date of sale or before the filing of income-tax return,
whichever is earlier. According to the change made in Finance Act, 2014, one
can invest a maximum of Rs.50 lakh out of the total capital gains in capital
gain bonds.
Src: livemint
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