Tax for selling inherited property and owned property
I own a house in Thane (myself & my wife name), bought in 2005 (constructed in 2001)
Other house inherited at Dadar area (myself & my cousin). My name was added in share certificate in year 2014, property was constructed in 1972
I own one more house near Pune (myself & my wife) in 2013 (newly constructed)
If I decide to sell all these three houses and buy 1 house what will be the tax implication.
Thane house has a value of 1 Cr (bought for 14 lacs in 2005), has a loan against this home remaining amount 6 lacs
Dadar house will be sold for 2 Cr and divided among 2 so I will get 1 Cr, clear property
Pune house will be sold for 15-16 lacs (bought for almost 14 lacs), loan amount 8 lacs remaining
Could you please help me with the possibilities to work this out..
can I sell all 3 houses in one financial year ?
Can I take benefit of avoiding tax if I am using 1.5 Cr out of this to buy new house ?
Thanks a lot in advance..
Asked 6 months ago in Capital Gains Tax from THANE, Maharashtra
There are provisions in IT Act for availing exemptions under Capital gains arising from selling of House Property.
Like Section 54, provides if you are selling a House property and investing its proceeds into another Residential property, in that case you can avail to exemption.
There is time limit of 2 years for that.
CA Sourabh Pahuja
You canclaim exemption under Section 54 which states that any Long Term Capital Gain, arising to an Individual or HUF, from the Sale of a Residential Property (whether Self-Occupied or on Rent) shall be exempt to the extent such capital gains is invested in the
Purchase of another Residential Property within 1 year before or 2 years after the due date of transfer of the Property sold and/or
Construction of Residential house Property within a period of 3 years from the date of transfer/sale of property
Provided that the new Residential House Property purchased or constructed is not transferred within a period of 3 years from the date of acquisition
If the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain.
So in your case, you can compute the amount of capital gains and if you buy a house with all the conditions above fulfilled, there will be no tax liability at your end.
Hope this clarifies.
Calculation of capital gain as follows.
Thane Dadar Pune
Sale consideration 0.50 Cr 1Cr 0 .18 Cr
Less Indexed COA 0.16 Cr 0.08 Cr
Capital Gain 0.34 Cr 1Cr 0.10 Cr
Total Capital Gain= 1.44 Cr
You will get exemption upto 1.44 Cr u/s 54 and there will be no tax on capital gain of Rs.1.44 cr if you invest in new house.
You can sell all 3 house properties in one FY and invest in 1 house property to claim capital gain exemption. Please note that you will have to invest the total amount of capital gains of all 3 properties. You don't need to invest entire sale proceeds. For this, capital gain calculations have to be done.
What is the cost of inherited property?
If you sell all the three houses, then Long Term Capital Gains shall arise in all the 3 houses. The same shall be taxable @10% after taking benefit of indexation.
For the purpose of calculation of tax other details like exact date of acquisition shall be required along with any additional costs for improvement incurred, if any.
Yes, you can definitely sell all the 3 houses in 1 financial year.
Yes, you will be eligible to take benefit u/s 54 in purchase of house from sale proceeds of these houses.
You can claim full Deduction u/s 54 if you utilize the entire Capital Gain Amount (From all 3 transactions). However, if you utilize only partial amount of the Capital Gain, then you'll save proportionate amount of capital gain tax
Yes, you can very well sell all the properties in order to buy a new property but in order to calculate your gains, please provide us valuation of your inherited property as on 01st April 2001.
CA, Greater Mumbai
In order to justify your query and calculate the Capital gains, I shall need
1. The exact date of purchase
2. Purchase Consideration.
3. Valuation as on 01st April 2001 if purchased prior to 01st April 2001.
4. Sale Consideration and date of sale of all properties.
Yes, you can invest the entire capital gains in buying a new property and save up on capital gains.