How to Save Capital Gains Tax on Property?

Given below is a list of the exemptions that can be claimed on gains made from capital assets.

  • According to Section 54 of the Income Tax Act a person is entitled to exemption of tax on profit gained if the complete profit amount is utilized to purchase another house or accepted real estate property. The new house should be bought within 2 years or a new house constructed within 3 years after the sale of the previous property.
  • A person is entitled to tax exemption if the whole capital profit is invested in NHAI bonds (National Highway Authority of India) or REC bonds which is( Rural Electrification Corporation )this provision is made under Section 54 EC and the limit is Rs 50 lakhs.

Suppose a person does not buy a property within the 2 years and neither is he able to make some plans regarding the same within the stipulated period of 2 -3 year s. Then he has another option of getting tax exemption this can be done if he invests the gains or profits in the Capital Gains Accounts Scheme (CGAS) or any of the public sector banks. Tax exemption in this case is applicable if the money is invested in stated period as per bank rules. Otherwise, the deposit is treated as capital gain and tax deducted on it.

  • If you sell agricultural land, which is not inside the limits of a civic body, then the capital gain made by it is not taxable.
  • Capital gains are not applied if the entire profit got from the sale of property is invested in setting up a medium or small scale industry. But the tools and equipment for the construction of the industry should have been bought within the stipulated 6 months from the date of sale.
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