Capital gains tax on property sale

Know about capital gains tax on property sale

Know about capital gains tax on property sale

When you sell a capital asset in India, you have to pay a capital gains tax. A property is considered a capital asset. Let’s say for example you bought a property for Rs.5 lakhs in the past and now you sell it for Rs.20 lakhs. This means you have to pay capital gain tax on property for profit of Rs.15 lakhs. Here is what you should know about this tax and how to avoid it.

Reinvesting sale proceeds in another property

The entire sales proceeds you get can be reinvested in another residential property. You have to do this in a period of 2 years to avoid tax.

Construction of another property

You can use the sales proceeds from one property to construct another residential property to avoid tax. For this you get a leeway of three years instead of two years.

Invest in capital gains bonds

The sales proceeds can also be invested in capital gain bonds. These bonds are issued by two government owned entities which are National Highways Authority of India and the Rural Electrification Corporation. However, these bonds have a cap of Rs.50 lakhs and you cannot invest more than this. It is important to know that the interest rate on these bonds is not much.

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