How to calculate Capital Gain Tax on Property Sale in India?

Tax Treatment Holding period as for FY2016-17 Holding period updated in FY2017-18 onwards Rate of Tax
Short terms capital gains Less than 3 years after issue or registry of OC, whichever happens later Less than 2 years after issue or registry of OC, whichever happens later Marginal tax rate – (till 30%), also 3% cess and till 15% surcharge
Long Term Capital Gains 3 years or more 2 years or more 20% with indexation benefit but 10% without indexation benefit.
Exemptions given if proceeds are invested in Section 54EC bonds or residential house.
Indexation benchmark changed to 2001 from the earlier 1981-82 in budget 2017-18

When a person sells a house, the tax is not on the complete selling price but just on profit that he/she males. In case the property is sold in 2 years, then this is termed as short-term capital gain, in which the amount can be retained until these two years without being tax, but after which if the amount is not invested in said ways, then flat 20% tax is liable on the amount. The long-term capital gain from capital assets are exempt under the Section 54 and 54F, once the capital gain amount is invest to purchase or construct a real estate house property, pertaining to certain conditions.

To qualify for tax exemption, the taxpayer must buy the residential house in a year or two of transferring the original house, while under construction properties must be completed in 3 years original house's transfer date. This house property investment must be done for real estate property in India. The advance paid for property selling will be taxed and later fortified to person for flat's sale if the transaction is not completed.

This taxed amount will assign under same year's 'income from other sources.' Also this amount can be lessened from acquisition cost of the asset for the year of sale on capital asset when determining its capital gains. The individual can also book a flat to save tax with the capital gain. For long term capital gain holding, the period is now reduced to 2 years from the earlier 3 years, in the budget 2017-18 of India.

To save taxes, one can even invest in specific bonds such as National Highways Authority of India or Rural Electrification Corp. Ltd. Otherwise one can save tax by capital gain investment in CGAS (Capital Gains Account Scheme) with the bank. However with sale of one property, one can invest the amount in only one new asset and not invest for multiple acquisitions for reducing tax. In case the person sells more than one property, he/she can invest this cumulative amount of capital gain in a single new property only.

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