BUILDER SELLING CONSTRUCTION PROPERTY

Your client's business model involves buying open plots, constructing houses, and selling them.

Here's a breakdown of the tax implications: Tax Implications -

*Capital Gains Tax*: If your client sells a property after holding it for more than 24 months, it's considered a long-term capital gain and is taxed at a flat rate of 20%.

However, if the property is sold within 24 months, it's considered a short-term capital gain and taxed according to the income tax slab rates. -

*Business Income*: If your client's primary mode of income is from buying, constructing, and selling properties, the profits generated from such activities are considered "Income from Business or Profession" and taxed accordingly

Exemptions - *Section 54 Exemption*: If your client invests the net proceeds from the sale of a property in purchasing or constructing another residential property within a specified timeframe (1 year before or 2 years after selling the old asset, or constructing a new house within 3 years), they may be eligible for exemption from capital gains tax.

Tax Benefits on Construction - *Interest on Home Loan*: Your client can claim a deduction of up to ₹2 lakhs for interest paid on a housing loan under Section 24B of the Income Tax Act.

However, this deduction is allowed only after the property is completed and possession is taken. -

*Principal Repayment*: Your client can also claim a deduction of up to ₹1.5 lakhs for principal repayment on a home loan under Section 80C.

GST Implications - *GST Rate*: The GST rate applicable to under-construction properties is 5%.

For affordable housing properties priced up to ₹45 lakhs, the GST rate is 1%.

 It's essential to consult a tax professional to determine the specific tax implications for your client's business, considering their individual circumstances and the complexity of tax laws.