Session-6 on Finances | Part-3 | Selling a House?- Ways of Tax Exempt | Sagar Kakkala's World

                                                         Disclaimer:

This blog is prepared based on the taxation rules in India as of 2024, with specific reference to the Union Budget 2024-2025 (i.e., April 1, 2024 – March 31, 2025). The information provided is for educational purposes only.

It is highly recommended to consult the latest budget updates and seek advice from your Chartered Accountant (CA) or financial advisor before making any decisions related to Selling a House

While there are minimal changes with every budget release, it is crucial to stay updated with the latest developments and amendments.

This Blog has been reviewed by CA - Sai Manoj

Selling a House? - Ways of  Tax Exempt

In case , You decide to sell a house, You will be taxed of Capital Gains 

Here Area you bought house might have different Stamp Duty Tax, And this Stamp Duty Tax plays a Major role in your Capital Gains Tax

Let us take Scenarios to understand better

Scenario1: Higher Stamp Duty

Let us say, You bought a house at 55L, and you have furnished or used some other improvements which increased value of house, and Cost of Improvement is 5L, You have Sold House for 70L

And Stamp Duty value in that area is 80L, Now your Capital Gains becomes

Here in this Scenario, Your Capital Gains is calculated as following

Important Note:
Capital Gain = Max (Stamp Duty Value | Actual Sold Value) - Cost of Purchase - Cost of Improvement

so here our Capital Gain = 80 - 55- 5 = 20L

You will be taxed for 20L

Scenario1	Details	Amount (₹)
Stamp Duty Value	Value considered for taxation	80,00,000
Actual Sold Value	Actual selling price	70,00,000
Cost of Purchase	Cost incurred when buying the house	55,00,000
Cost of Improvement	Expenses for improvements	5,00,000
Capital Gain	Final taxable gain	20,00,000

Scenario2: Higher Actual Sold Value

let us consider same scenario as scenario1 but consider Sold House Value is 90L, Now our Capital Gains will be 90L - 55L - 5L = 30L, You will be taxed for 30L

Scenario3:  Section 50C | SDV- ADV = 5%

If Stamp Duty value (SDV) has 5% Difference of Actual Sold Value (ADV) , Then in such cases, Actual Sold Value is considered

Let us say Stamp Duty in Area is 1.05 Crore

And You have sold your house for 1 Crore

Here Even if you stamp Duty of 1.05 Crore, According to Capital Gain , 1.05 Crore must be selected

But In this case, ₹1 crore (ASV) will be considered for capital gains calculation, not the higher SDV of ₹1.05 crore.

Tax Exempt

Note: For Ease of Computations , Stamp Duty Value and Cost of Improvements were not included here

1.Capital Gain Account Scheme (CGAS)

This is a Account you can get from Banks, How it Works?

lets say you sold your house for 1 crore, You bought it for  30 lakhs, so 70 Lakhs is your Profit . But you want to use this money to buy another house or for construction of another houses, In such case, You can use this Account

You have to deposit your capital Gain 70 Lakh in your CGAS Account, You will also get an Interest of 6% once you have deposited in the account

Deadline is 2 Years in case you want to buy a new house

Deadline is 3 Years in case you are using Money for Under Construction house

And if you have sold your new house within 3 years, entire tax exempt will be reversed 

If you cross the deadlines, the entire 70Lakh is Taxed post deadlines 

In case, you have only used 40Lakh to buy a new house , the remaining 70L-40L= 30L will be taxed

Maximum Tax Exemption is till 10 Crores under Section 54.

Note : If you sold the house and want to buy two properties, In such cases , Only 2cr is exempted Example:

If you sold the house and want to buy two properties, only ₹2 crore is exempted under the CGAS (Capital Gains Account Scheme).

For instance: You sold your house for ₹12 crore and bought two residential properties for ₹3 crore. Here's how the exemption works:

• If you had bought only 1 property: Your CGAS tax exemption would be ₹12 crore - ₹3 crore = ₹9 crore (Tax-free).
• Since you bought 2 properties: The CGAS tax exemption is limited to ₹2 crore. So, out of ₹9 crore, only ₹2 crore is exempted, and you will be taxed on ₹7 crore.

2.NHAI bonds/ REC bonds

In case, You bought a house for 50 Lakh, And Sold it for 1 Crore, Here your Capital Gain is 1 Cr- 50L =50L

You need to buy National Highway Authority of India bonds or Rural Electrification Corporation bonds within 6 months from date of your house sale

Here You need to invest complete value of 1Cr, Not just your 50L profit. Complete sale value of house to be precise

Here Lock in Period is 5 Years, and you cannot pledge these bonds to take loans

In case, you broke the bond, you need to pay tax

Tax Exemption limit is 50 Lakhs

3. Gift or Inheritance 

In case, you got the house from your Father or Grand Father as a Gift, The property will be complete Tax free

In case, You are a woman and unmarried, You got the house from your father as a Gift or As a Gift for your marriage, It will be Tax free. But Post Marriage, Inheritance rules would not apply and Tax will be levied

TDS Part in buying a house

In case, You are buying a house above 50Lakh, TDS of 1% must be detected from seller according to Section 194IA

And if owner did not provide PAN Card, TDS of 20% must be deducted

Example: if you are buying a house of 70 lakhs, 7000 rupees you have to deduct and you have to pay only 63,000

You have to Pay Deducted fee to Government by FORM 26QB within 30 Days of Deduction

You have to Issue TDS Certificate to your buyer and FORM16 will be available on 10 to 15 days once paid

What Happens If You Did Not Follow TDS Deduction Norms?

1. If you didn’t deduct TDS, you are required to pay 1% per month from the date you were supposed to collect it until the day you pay.
2. If you didn’t pay TDS to the government, you must pay 1.5% per month. Additionally, you are liable to a penalty of up to ₹200 per day.
3. The Assessing Officer can impose a penalty ranging from a minimum of ₹10,000 to a maximum of ₹1 lakh.
4. The Assessing Officer cannot impose a penalty if you pay the dues within 1 year.

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