Capital Gain Tax on Sale of Property/Land

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Sakshi Shah

Capital Gains
Income Tax
Indexation
Sale of Property

Immovable Property or Land is considered to be a Capital Asset as per the Income Tax Act. A taxpayer who sells an immovable property or land should report such income or loss as Capital Gains it in the Income Tax Return and pay tax on it at the applicable rate. Capital Gain Tax on the sale of property or land is determined on the basis of the nature of the long term or short term.

ITR for Gains from Sale of House / Property
CA Assisted Income Tax Return filing for individuals and HUFs having Capital Gains / Loss income from sale of house, property, land, etc.
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ITR for Gains from Sale of House / Property
CA Assisted Income Tax Return filing for individuals and HUFs having Capital Gains / Loss income from sale of house, property, land, etc.
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Capital Gain on Sale of Property / Land

The Capital Gain can be of two types depending on the period of holding of the capital asset.

  1. Long Term Capital Gain (LTCG): If the taxpayer sells an immovable property or land held for more than 24 months, gain or loss on such sales is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).
  2. Short Term Capital Gain (STCG): If the taxpayer sells an immovable property or land held for up to 24 months, gain or loss on such sale is a Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL).
The holding period for immovable property i.e. land, building and house property was 36 months up to FY 2016-17. However, the period of holding is reduced to 24 months FY 2017-18 onwards.
Tip
The holding period for immovable property i.e. land, building and house property was 36 months up to FY 2016-17. However, the period of holding is reduced to 24 months FY 2017-18 onwards.

Income Tax on Sale of Immovable Property

Income Tax on the sale of immovable property i.e. land, building, or house property is similar to the tax treatment of other capital assets.

Calculation of Long Term Capital Gain tax on sale of property in India

The income tax rate for LTCG on sale of property in India is 20% with Indexation benefit. Using the indexation benefit, the taxpayer can adjust the cost of the asset with the CII (Cost Inflation Index) List issued by the Income Tax Department. The Indexed Cost of Acquisition is used to calculate the Capital Gains. The cost of Improvement is the expense incurred by the taxpayer for making addition or improvements to the capital asset. The taxpayer can also calculate the Indexed Cost of Improvement.

  Particulars Amount
  Sale Consideration XXXX
Less Transfer Expenses (XXXX)
Less Indexed Cost of Acquisition (XXXX)
Less Indexed Cost of Improvement (XXXX)
Less Exemption u/s 54, 54EC, 54F (XXXX)
  Long Term Capital Gain XXXX

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Calculation of Short Term Capital Gain tax on sale of property in India

The Short Term Capital Gain is taxed as per the slab rates. There is no indexation benefit in the case of a Short Term Capital Gain. Further, the exemption under Section 54 to 54F is also not available. Thus, the Capital Gain is calculated on the basis of the cost of acquisition, cost of improvement, and transfer expenses.

  Particulars Amount
  Sale Consideration XXXX
Less Transfer Expenses (XXXX)
Less Cost of Acquisition (XXXX)
Less Cost of Improvement (XXXX)
  Short Term Capital Gain XXXX
Not sure how to pay tax on your investments?
Read this article to understand the tax rates for AY 2020-21
Read More
Not sure how to pay tax on your investments?
Read this article to understand the tax rates for AY 2020-21
Read More

ITR Form & Due Date for Income from Sale of Immovable Property

FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020
Tip
FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020

Carry Forward Loss on Sale of Immovable Property

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