By House property owners in India must pay capital gains on the sale of their homes. This is due to the fact that the sale of a house results in profits for the owner. Capital gains on the sale of a house are the increases in the value of the house over time. Furthermore, the income tax filing online is calculated by the owner when the house is sold. In a nutshell, capital gains on the sale of a house are the difference between the selling and purchase prices of the house. Keep reading the article to learn more.
Capital Gains Tax on Property Sales
The capital gains tax on house sales is calculated based on the length of time the property has been owned. This time period is divided into two parts:
– Capital Gains in the Short Term
– Capital Gains Over Time
Short-Term Capital Gains: If the house property is sold within 24 months of purchase, the profits earned on the sale are known as Short-Term Capital Gains.
Long-Term Capital Gains: On the other hand, if the house property is sell after or within 24 months of purchase, the profits earned on the sale are Long Term Capital Gains.
Capital Gains Tax on Short-Term Gains
Short-term capital gains are according to the seller’s Income Tax Slab. The following are some of the key points that the seller should consider before selling the property within the next 24 months:
– The seller may adjust/reduce the sale consideration for any brokerage, commission paid at the time of the sale of the house property.
– The seller may also deduct any construction and home improvement expenses incurred during the period held/owned the asset.
– No benefit of indexation or cost inflation adjustment allow on the sale of property held/owned for a shorter period of time.
– There are no exemptions for short-term capital gains.
– If the seller falls into a higher income tax bracket, the liability under Short Term Capital Gains can be significant.
Capital Gains Over Time
Long-term capital gains on the sale of a home are tax at 10%. This is without indexation or 20% with indexation, whichever is lower.
If the house property sell after or after more than 24 months . The indexation or cost of inflation benefits. Because the value of money depreciates over time, the Income Tax Department has permitted the indexing of property to account for inflation.
A few considerations for the seller when selling a house with Long Term Capital Gains:
– The seller may adjust/reduce the sale consideration for any brokerage. Commission paid at the time of the sale of the house property.
– The seller may also deduct any construction and home improvement expenses incurred during the period held/owned the asset.
– The benefit of indexation and income tax filing online is available to LTCG sellers.
– Exemptions may also be available on the sale of a house with LTCG.
TDS On Commission And Brokerage Section 194H
TDS under Section 194H must deduct by anyone who pays a commission or brokerage to a resident.
Final Thoughts
Individuals and HUFs whose business turnover exceeds Rs 1 crore or whose gross receipts from profession exceed Rs 50 lakh must deduct TDS or itr filing India beginning with the fiscal year 2020-21. Section 194H defines commission or brokerage as “any payment received or receivable, directly or indirectly, by a person acting on behalf of another person.”
