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Taxes a land owner in Tamil Nadu required to pay
27-Jun-2023 (In Property Law)
Hi, I need clarification that for selling my land. The broker who contacted us asking us there is a law that every land seller should pay 10% to the government. Is it true? and what are the procedures should land owner do and the list of documents needs to be get.
Case 01:
You bought a home, improved it and sold it for a profit within three years of purchase.
Your profit (i.e. sale price - price at which you bought - cost of improvement - cost of transfer ) is called as Short term gain. This amount is added to your total income in the financial year and you have to pay tax at applicable tax rate based on your income.
Also note, if you bought the house on loan and claimed deductions under section 80c for repayment of loan earlier, the deductions are reversed and you have to pay tax on them too.
No deductions possible against short term capital gains.
Case 02:
You bought a home, improved it and sold it for a loss within three years of purchase.
Your loss (i.e. price at which you bought - sale price - cost of improvement - cost of transfer) is called short term loss. Such a loss can be set off against capital gain from any other short term or long term gain during the financial year thereby reducing your tax burden.
Case 03:
You bought a home, improved it and sold it for a profit after three years.
The profit obtained is called long term gain. Long term capital gain tax is at 20% only.
Calculation of long term capital gain is slightly different. The purchase price will be indexed against inflation. The example below gives an idea
Saving long term capital gains is possible by adopting any of the following ways
Use the entire profit to buy another house within two years or construct a new house within three years. Since buying a home takes time, invest your amount in Capital Gains Account Scheme so that you aren’t taxed in the very year of sale.
If you have already bought a second house within a year before selling the first house, you could still avail the tax exemption
You can invest up to 50 lakh in a financial year, in bonds of National Highways Authority of India and Rural Electrification corporation of India. The amount invest is deducted from capital gain before calculating taxes
Invest your profit in small or medium scale enterprise for acquiring plant or machinery within six months of sale.
You bought a home, improved it and sold it for a profit within three years of purchase.
Your profit (i.e. sale price - price at which you bought - cost of improvement - cost of transfer ) is called as Short term gain. This amount is added to your total income in the financial year and you have to pay tax at applicable tax rate based on your income.
Also note, if you bought the house on loan and claimed deductions under section 80c for repayment of loan earlier, the deductions are reversed and you have to pay tax on them too.
No deductions possible against short term capital gains.
Case 02:
You bought a home, improved it and sold it for a loss within three years of purchase.
Your loss (i.e. price at which you bought - sale price - cost of improvement - cost of transfer) is called short term loss. Such a loss can be set off against capital gain from any other short term or long term gain during the financial year thereby reducing your tax burden.
Case 03:
You bought a home, improved it and sold it for a profit after three years.
The profit obtained is called long term gain. Long term capital gain tax is at 20% only.
Calculation of long term capital gain is slightly different. The purchase price will be indexed against inflation. The example below gives an idea
Saving long term capital gains is possible by adopting any of the following ways
Use the entire profit to buy another house within two years or construct a new house within three years. Since buying a home takes time, invest your amount in Capital Gains Account Scheme so that you aren’t taxed in the very year of sale.
If you have already bought a second house within a year before selling the first house, you could still avail the tax exemption
You can invest up to 50 lakh in a financial year, in bonds of National Highways Authority of India and Rural Electrification corporation of India. The amount invest is deducted from capital gain before calculating taxes
Invest your profit in small or medium scale enterprise for acquiring plant or machinery within six months of sale.
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Adv. Siddhant Sharma
Delhi | 500+ Answers
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