Calculation of the property coming from selling a house

The profit coming from selling a house is called “Capital Gains”.  Let’s look at how the tax on these capital gains is calculated and the opportunities that taxpayers have, to reduce the tax burden. The “capital gains” is one of the points of the Indian tax laws. The profit coming from the sale of a capital asset is taxed under the “capital gains”.

According to the tax policy the holding time

Due to the reason for imposing a tax on capital gains, the capital assets are divided into two categories based on their holding time.  On the basis of the asset being held for more than a specified time period than it falls under long term capital gains if that is not the case then it falls under short term capital gains. To acquire a long term capital gain the land or building must be sold after holding it for 36 months. Let’s take for instance; someone is selling under-construction Flats In Rajarhat which can neither fall under land or building and it becomes a long term only if from the date of sale the property is clutched for more than 36 months. The short term capital gain, on the other hand, is put together with the other income and later is taxed at the slab rates which will be applied.

Regulations on inheritance or gift as per holding period

In case the property comes as a gift and this gift is coming from a family member such as your father who has inherited the property from your grandfather then the holding date is calculated from that initial date. If you have acquired the property yourself, for example, you bought a property from the Upcoming Residential Projects In Kolkata, as soon as the construction is over the property will be handed over to you and then the calculations becomes easy as the holding dates starts with your purchase of the property while in the case of inheritance this is rather complicated. The property is no longer for you to initiate the holding period as your ancestors have already done it.

Regulations for an under-construction property as per holding period

In case of an under-construction property calculating the holding period is very uncertain with such properties, which you have booked with the builder and which have been sold after taking possession. This matter is kept in mind for proceeding with the jurisdictions. In terms of the rights of an under-construction house being transferred before taking possession, then the holding period will start from the booking date of the same. On the other hand, if the possession is given after the property has been transferred then the holding date will start from the day one took the possession to avoid litigation. The reason behind this is the law doesn’t permit the combination of under-construction building and one ready-to-move property. Prior to taking possession of the house that you owned what you had is the right to acquire that house, which is definitely not the material such as a property in Rajarhat or any upcoming residential projects in Kolkata which will be considered only when you have taken the possession of the same. Nevertheless, if one inherits or acquires such property before 1st April 2001 that person can substitute the fair market value of the property, as on that date, for your cost of attainment.

The Entire Cost Calculation

The main cost like brokerage, registration charges, stamp duty, transfer fees, etc., that one paid on the regard of the property being sold, will be considered as a part of the cost. In short, any expenditure gained consequently, for development of the property, is also adequate for deduction as ‘cost of improvement’.

Perks of Indexation

If the property suppose flats in rajarhat is held for more than 24 months one can improve their cost of acquisition for working out the taxable long term capital gains where indexations are at play. The original cost of acquisition and the cost of improvement are indexed with the position of the ‘cost inflation index’ notified by the government of that year. This is notification is sent each year after 2001 and this is also based on 2001 when the base value was 100. In the case of the assets acquired either in the term of 2001-2002 or which the fair market value, will be taken as the cost of acquisition, the base value which was 100 goes up every year. In the financial year, 2018-2019 was 280. For calculating the long-term capital gains indexed cost acquisition of property will be reduced as per the net sale. For, those properties which were bought after 2001 the calculation of such property formulates by multiplying the original cost by the cost inflation index of that year of sale and the same will be divided by the cost inflation index of the year of acquisition of the property.

Now, those house properties which were purchased in 2001-2002 for Rs 1Laks and sold at Rs 5Laks on March 1, 2019, for the indexed cost and long-term capital gains will be Rs 2.80Lakhs and the taxable long-term gains will be Rs 2.20Lakhs. Similar to your original cost, you are unrestricted to index your cost of improvement, from the year in which the expenses for improvement was acquired by you.

By LNN (Liyaans News Network)