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Tax liability out of selling flat

omesh (executive) (31 Points)

08 September 2014

Dear All,

I had purchased a flat 2 years before only in navi mumbai @ Rs. 27 lakhs .Now Iam planning to sell this flat and

invest the money in buying other flat.My question is:

1)What are tax liabilites arise if I sell the flat in 31 lakhs now?

2) Can the tax liabilities may be mitigated if I invest the profit of Rs. 4 Lakhs in buying new flat ( i.e. I had purchased the flat 2 years before only )?

Please guide me in this matter.

Thanks in advance.

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12 Replies

NAVEESH DHAR (ADVOCATE- TAXATION ADVISOR) (427 Points)
Replied 08 September 2014

As the holding period is less than 3 years the profit of rs. 4 lacs on sale of capital assets I.e. flat will be computed under short term capital gain and will be added to other income, the tax will be calculated axcordinhly . Further there is no exemption benefit on short term capital gain

1 Like

Anubhav (Chartered Accountant) (429 Points)
Replied 08 September 2014

agree with Mr Naveesh.

Try ho hold the property for 3 years. Then only benefit can be claimed.

1 Like

Prerana (Student) (111 Points)
Replied 09 September 2014

Agreed with above, to get benefit of exemption u/s 54, the asset to be transferred should be a long term capital asset which means the holding period should be 36 months

1 Like

Joswin Punchakunnel (Chartered Accountant) (314 Points)
Replied 09 September 2014

dear omesh,

try holding the flat for one more year. then it would become long term capital asset and then there would be ways to mitigate tax liability......

1 Like

omesh (executive) (31 Points)
Replied 09 September 2014

Does it mean that :

1)only Long term capital gain can be reinvested into a property to

save income tax?

2) and you have to pay income tax necessarily for short term capital gain?

NAVEESH DHAR (ADVOCATE- TAXATION ADVISOR) (427 Points)
Replied 09 September 2014

Yes the option to save tax on capital gain is available on long term by reinvesting the capital gain amount.

1 Like

Rohit Pandey (Student) (766 Points)
Replied 09 September 2014

First tell me where you got a flat in Navi Mumbai for jus 27 lakhs. I would like to buy one too then. Secondly, coming to your query; as per section 54 of Income tax act, 1961 you can only take advantage if property is held for atleast 3 years i.e. long term gain has arised after selling of property. Also you must then purchase property a year before or within two years from the sale of the said property. Application of Long term gain arose from the sale of property shall be allowed as deduction u/s 54 to the extent used for sale or construction of new house. The property whether sold or purchased must be a residential property. And lastly, tax has to be paid on short term capital gain from sale of residential property.

1 Like

omesh (executive) (31 Points)
Replied 10 September 2014

Dear all, I have taken home loan for this property. I take rebate on income tax on the interest paid on home loan.My query is: 1)If I sell this property now(i.e in two years only) then does the rebate claimed on interest paid on home loan will also be reversed? means.....will that rebate claimed also add to my income now ?

payal (student) (21 Points)
Replied 10 September 2014

No it is not the case, deduction already claimed will not be reversed

Joswin Punchakunnel (Chartered Accountant) (314 Points)
Replied 10 September 2014

dear omesh,

there is no need to be worried. you might have claimed deduction as per section 24 or an additional deduction under 80EE(Chapter VI-A deduction) in case the interest on loan exceeded the limit specified under section 24.

any way there is no such provision as reversing the deduction claimed(it is worth mentioning here that there are some provisions which reverse the deduction or exemption. you might have got confused with any of these provisions)

any way in your case none of those provisions are applicable

CS Advocate Abhishek Goyal (M Com FCS LLB M-AIMA ) (13531 Points)
Replied 16 September 2014

But if you sell this property today i.e. only after two years the section 80C benefit which you might have availed on principal repayment will be reversed. This condition is given u/s 80C that the property must be held for five years.

NAVEESH DHAR (ADVOCATE- TAXATION ADVISOR) (427 Points)
Replied 16 September 2014

Agree with ABHISHEK.... if you sell the property within 5 years than whole tax benefit claimed in the earlier period will be added back in your income .