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I Want To Sell My House. How Will I Be Taxed?

Adhil Shetty

I am selling my first house. What should I know about the computation of tax on the profits from the sale? — S. Shah

Answer:

An investment in property for a period of less than 2 years is termed as a short-term investment, and capital gains thus accrued are called Short Term Capital Gains (STCG). Whereas, an investment period of more than 2 years for property is called long term investment and profit earned in such a period is considered Long Term Capital Gains (LTCG).

STCG from property transaction is taxed at the slab rate applicable on the seller. LTCG is taxed at a 20% rate with indexation benefit (plus applicable surcharges and cess).

If your gains from this sale would be long-term, you can save your LTCG from tax on the sale of residential property by investing the sale proceed under Section 54 of the Income Tax Act in one residential house within the prescribed period, in India.

In budget 2019, it has been proposed to allow the investment of sale proceeds not exceeding Rs. 2 crore in 2 residential houses, and this facility can be availed only once in a lifetime.

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