No capital gains tax on property if you sell it after 2 yrs, earlier it was 3 yrs

No capital gains tax on property if you sell it after 2 yrs, earlier it was 3 yrs

The Finance Ministry of India has given a tax relief on the capital gains sale in the Union Budget for the financial year 2017 – 2018 conducted on 1st Feb, 2017. As per the latest policy, if someone wants to sell an immovable property even after 2 years, then also there will be no tax imposed on the capital gains. Earlier this limit for getting tax benefits on capital gains was 3 years. This initiative will surely help lot of real estate purchasers who want to sell off their land or building in short period of time. As per Hon’ble Finance Minister of India, Mr. Arun Jailtey this step will reduce the tax burden on those real estate sellers who wish to sell off their immovable property.

How tax on capital gains is calculated?

If a person buys an immovable property which may be a land plot, a flat or building, this is considered as an immovable asset. However, whenever the person wishes to sell that property, there are some regulations involved in the taxation of the capital gains. This rule is also applied for those who do not buy the property at the first hand and acquire it through some means. Previously, the Govt. used to declare those properties which were resold within 3 years as short term capital gains. A property when sold after a certain period of time attracts some profit margin generally. The profit gained from selling that property will be summed with the annual income of that owner and then tax slabs will be applicable. The rate of taxation is 20 % which is calculated after the indexation process. However, with the latest initiation by the government, a property will be declared a long term property after the span of two years only.

Benefits of the policy:

  • This policy will surely reduce the burden of tax imposed on those who want to sell off their property in short period of time i.e. within 2 years of registration.
  • The capital will not stay hold for longer and the immovable capitals will have easy movement, thus creating revenue and business in real estate sector.
  • There will be proper indexation of the property based on several factors such as purchase price of the property, registration charges, present rate of the property, etc. The tax will be calculated at 20 % after the total indexation.
  • Several other added benefits are also included in selling a long term immovable property rather that the selling of short term properties. Some of the benefits are that the selling can also include the expenses for repairs or renovation incurred during possession.
  • Another benefit of selling a long term property is that is the seller has not made a claim of tax deduction for the interest paid during the construction of the property, the he can do that while selling.
  • Under the new regulations, the base year for calculation of indexing benefits will be 2001 which was earlier 1981. This will be very beneficial for the property sellers as it will reduce their tax burden.
  • This scheme will also encourage all the property sellers to make fair disclosure of the exact selling price of the immovable property.

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