Want to Sell Your House? Know the Tax Implications!

The first budget proposed by the finance minister after the ascent of the new government at the center has had several changes in income tax laws with respect to capital gains accrued from the sale of property. The finance minister has capped the amount that can be saved from taxes through investment in capital gains of longer terms for sale of property in specific bonds, also termed as capital gains bonds. The finance minister has also specified that investment must be made on residential properties located in India for availing benefit of longer term capital gains.

According to current rules of income tax, capital gains in the long term accrued from property held for 3 years attracts 20% tax. Exemptions have been granted under specific conditions. However, some of the changes proposed for income tax laws seek to overturn a couple of these laws. Some of the changes proposed are as following.

Exemption of capital gains tax on housing property

According to current tax provisions, longer term capital gains that come about from a capital asset’s sale is exempted under Section 54/54F in case it is invested in construction or purchase of housing property, subject to specific conditions. For gaining exemption on capital gains, an assesse must purchase a new house one year below or 2 years post transfer of the original house. For the properties under construction, the construction must be completed within 3 years from the transfer date of the original property.

The finance minister has clarified now that investment for availing benefit of capital gains must be in residential housing property located in India and not abroad. The amendment shall apply for the assessment year of 2015-16 and following years.

Availing exemption on long term capital gains by investing in bonds

A lot of investors who sell off properties, save taxes on longer term capital gains through investment of capital gains amount in specific bonds, also known as capital gains bonds. Tax payers who wish to claim these exemptions from longer term capital gains must invest the sum in capital gains bonds within 6 months from the sale date or prior to filing of income tax returns, whichever comes earlier. The benefit can be availed from Section 54EC of Income Tax Act of 1961 till a capping amount of Rs 50 lakhs in a particular financial year.

The ministry of finance has clarified now that total exemption with respect to long term capital gains for investing in capital gains bonds would be limited to Rs 50 lakhs. The amendment shall be applicable for the assessment year of 2015-16.

Advance acquired for property sale and its forfeiture

The finance minister has proposed to levy taxes on advances received and forfeited later by individuals for sales of capital assets such as flats in case the transaction falls through. If negotiations do not translate into capital asset transfers and money charged as advance is forfeited by an assesse, then the sum shall be taxed in the assessment year under “income from other sources”. Under current provisions, the amount may be reduced from acquisition cost of an asset subsequently in the sale year of the capital asset when determining capital gains. This amendment shall also be applicable from 2015-16 and subsequent years. 

Transforming home buying experience

Home buying experience has been much simplified compared to what it used to be even a decade ago. No more do home seekers have to rely solely on brokers to locate the best properties within their budgets. Real estate websites provide a holistic solution to home seekers in netting their dream home within an affordable budget.

Real estate websites not only work as property consultants, advising you about the different profitable residential communities coming up within the city, but also accompany you for site visits and help you with the paper work. For instance, on IndiaHomes, more than 600 employees work collectively to make home buying a pleasant, fruitful and hassle free experience for home seekers.

As a buyer or investor, you should look for the parameters to choose the best property available within your preferred location(s), budget or specification(s). Consider the nearby projects, the profitability of investing in certain areas around the city and similar factors. Home buying may be a personal affair, but there is no harm in trying to find out the best value of your selected property. You can also participate in the discussions being held on several websites where people share their myriad home buying experiences. You could take a tip or two from their experiences to ensure that you get the best option.

To transform the experience of buying a property, you can register your name, mobile number and other details on the website. IndiaHomes provide a 5 minute call back facility to discuss your requirements. They will explain you the pros and cons of the residential community. Not only will they help you in selecting the right property, but also in getting your loan approved at the lowest possible interest rate with a feasible repayment plan.

Reputed real estate websites often give special offers on occasions. For instance, IndiaHomes offered to pay Rs. 1 Lac to select home buyers on completing 5 years in business. Recently, the company conducted a real estate sale for buyers to pick the best properties in India as per their budget. 

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Why should you consult a property advisor before buying a home

Buying a home is a big responsibility. For most, it is the biggest investment they make in their life. Since it is your biggest purchase, shouldn’t you pay as much attention as possible to getting it right? You should enquire as much as possible into different localities, property rates, and possibility of price appreciation, social fabric, connectivity, loan approval and much more. However, it is not possible for most to get all these after balancing a full-time job. This is where a property advisor steps in.

Property advisors typically have been dealing with real estate in a city and they know which areas one should invest in. They have all the information regarding different properties that are being built in a city, the property rates that are prevailing in a particular area, the brokerage that shall be charged for a house, the stamp duty and registration fees among other things. Property advisors would be able to guide you correctly about the kind of property that is suited for your requirements (proximity to work place, easy availability of different amenities, good civic infrastructure, reliability of a particular developer, prospects of future growth and much more). Property advisors would accompany you to see different properties and point out the benefits or flaws of the property. S/he would also assist you with getting your loan sanctioned from the bank. A lot of property advisors have good relations with bank managers and they can get you the best bank rates and the most flexible repayment plan.

Most buyers nowadays consult property advisors because they need not worry about finding the best property for themselves as the advisor takes it upon him or her to get it done. You can get in touch with a property advisor online or off it. The fee charged by property advisors is almost nominal, compared to the services offered to you. 

Before you hire a property advisor, you must look into his/her credentials and ensure reliability and trustworthiness. There have been several cases in the past where home buyers relied on property advisors who turned out to be fakes. Make sure you hire the services of a property advisor who has been recommended by a friend or relative. Many sales agents of different property developers pose as property advisors and push unsuspecting home buyers into buying properties which may or may not be as good as some of the alternatives. Therefore, you must always check the registration number of a property advisor before dealing with him. You can also hire the services of property advisors who work with reputed websites. Some websites themselves work as property advisors and help you with your investment to make the most.

The demand for property advisors is steadily rising because of their professional approach to the task of home buying. If you have hired the best property advisor for yourself, you can rest assured that you will get the best of services for property India. It is quite a small sum to pay for the services that you will be receiving.

You may also read: Real Estate Investment Guide for Metro Cities