Capital Good points Tax on Sale of Property in India is levied relying on the period for which the property was held by the vendor. If the property was held for lower than 2 years – it will be labeled as a Quick Time period Capital acquire and if the property was held by the Vendor for greater than 2 years, it will be labeled as a Lengthy Time period Capital Achieve.
Capital Achieve Tax Price on Sale of Property
| Particulars | Tax Price |
| Quick Time period Capital Achieve Tax Price | As per regular Revenue Tax Slabs |
| Lengthy Time period Capital Achieve Tax Price | 20% |
Computation of Quick Time period Capital Good points on Sale of Property
Good points arising on the time of sale of Quick Time period Capital Asset shall be computed within the following method:-
| Full Worth of Consideration | xxx | |
| (Much less) | Expenditure incurred wholly and completely in reference to such Switch/Sale | xxx |
| (Much less) | Value of Acquisition | xxx |
| (Much less) | Value of Enchancment | xxx |
| Gross Quick Time period Capital Achieve | xxx | |
| (Much less) | Exemption (if any) obtainable u/s 54B/54D/54G/54GA | xxx |
| Web Quick Time period Capital Achieve on Sale of Property | xxx |
Tax as per the Revenue Tax Slab Charges shall be payable on the Quick Time period Capital Achieve computed above.
Computation of Lengthy Time period Capital Achieve
In case the property has been held for greater than 2 years, it will be labeled as a Lengthy Time period Capital Achieve. The next are the principle advantages of classifying as a Lengthy Time period Capital Achieve:-
- Flat charge of 20% Capital Good points Tax
- The advantage of Indexation can be claimed
- Varied tax exemptions below Part 54, Part 54EC, Part 54F can be claimed
The way of computing Taxable Lengthy Time period Capital Good points on Sale of Property are as follows:-
| Full Worth of Consideration | xxx | |
| (Much less) | Expenditure incurred wholly and completely in reference to such Switch/Sale | xxx |
| (Much less) | Listed Value of Acquisition | xxx |
| (Much less) | Listed Value of Enchancment | xxx |
| Gross LTCG | xxx | |
| (Much less) | Exemption (if any) obtainable u/s 54/54B/54D/54EC/54ED/54F/54G | xxx |
| Web Lengthy Time period Capital Achieve on Sale of Property | xxx |
Different Related Factors concerning Capital Good points
- Advance Tax is required to be paid throughout the yr on the capital features arising on sale of the property no matter whether or not it’s Lengthy Time period Capital Achieve or Quick Time period Capital Achieve.
- In case a Quick Time period Capital Loss arises on the sale of a property, the brief time period capital loss may be set-off towards each Quick Time period and Lengthy Time period Capital Achieve arising in that yr. Nevertheless, if the loss is Lengthy Time period in nature, it may possibly solely be set-off with Lengthy Time period Capital Good points of that Monetary 12 months and never with Quick Time period Capital Loss.
- If the Loss can’t be set-off towards capital acquire in that yr, it may be carried ahead for the following 8 years and set-off sooner or later years.
TDS on Sale of Property
No matter whether or not it’s a Lengthy Time period Capital Achieve on Quick Time period Capital Achieve, TDS is relevant. TDS stands for Tax Deducted at supply and is a deduction made by the customer whereas making the cost to the vendor. After deducting Capital Gains Tax on Sale, the stability cost is made by the customer to the vendor.
TDS is just not a brand new type of tax however a type of tax which is paid prematurely and may be adjusted with the ultimate tax legal responsibility computed on the finish of the yr whereas submitting the earnings tax return. The speed of TDS will depend on whether or not the vendor is a NRI or a Resident and is defined under:-
- Vendor is Resident: 1% TDS can be deducted if the Property Worth is greater than 50 Lakhs. (Refer: 1% TDS on Sale of Property)
- Vendor is Non-Resident: 20% TDS can be deducted no matter property worth. Cess and Surcharge would even be relevant over and above this 20%. (Refer: TDS on Sale of Property by NRI)
Which means of Phrases talked about above
Full Worth of Consideration
Full Worth of Consideration means what the transferor receives or is entitled to obtain as consideration for the Sale of Property /Asset. This Worth could also be in money or in form i.e. in trade for an Asset.
In case of trade of an asset, the complete worth for the computation of Capital Good points shall be the Honest Market Worth of the Property (Asset) granted in trade. Honest Market Worth in relation to Capital Good points means the worth which the Property (Asset) would usually fetch if offered within the open market on the Related Date.
In case, the complete worth of consideration is acquired in installments in several years, the whole worth of consideration shall be the Market Worth of the Property/Asset granted in trade.
Bills on Switch
Bills on Switch embrace any expenditure incurred, whether or not straight or not directly, for the aim of switch like Commercial Expense, Brokerage Expense, Stamp Obligation, Registration Charges, and Authorized Bills and many others. Nevertheless, any expense which has been claimed as a deduction below every other provision of the Revenue Tax Act can’t be claimed as a deduction below this Clause.
Value of Acquisition
Value of Acquisition is the worth which the assessee has paid, or the quantity which the assessee has incurred, for buying the Property /Asset. The Bills incurred on the time of finishing the title are part of the price of acquisition.
In instances the place the Capital Asset turned the property of the assessee in any of the manners talked about under, the price of acquisition shall be deemed to be the price for which the earlier proprietor of the property acquired it:-
- On the Distribution of Belongings/ Whole Partition of HUF
- Below a Reward or Will
- By Succession, Inheritance or Devolution
- On Distribution of Belongings on Liquidation of a Firm
The place the price for which the earlier proprietor of the capital asset acquired the property can’t be ascertained, the price of acquisition to the earlier proprietor shall be the truthful market worth of the asset on the date on which the asset turned the property of the earlier proprietor. The Curiosity on cash borrowed for buying the capital asset may also type part of the price of Asset supplied the deduction for curiosity has not been claimed earlier.[CIT v Mithlesh Kumari (1973) 92 ITR 9 (Del)]
Value of Enchancment
All Capital Expenditures incurred in making any additions or alterations to the Capital Asset by the Assessee after it turned his property or alterations to the capital asset by the assessee after it turned his property shall be deductible because the Value of Enchancment. If the Asset was transferred to the assessee below the instances specified instantly above, the capital expenditure incurred by the earlier proprietor shall even be handled as price of enchancment.
Nevertheless, the Value of Enchancment doesn’t embrace any capital asset which is deductible in computing the chargeable below head- “Revenue from Home Property”, “Income or Good points of Enterprise or Occupation”, or “Revenue from Different Sources”. Solely the Capital Bills are thought-about as a price of Enchancment and routine bills on Repairs and Upkeep don’t type a part of price of enchancment.
For the aim of Computation of Lengthy Time period Capital Achieve, Indexation utilizing the Value Inflation Index shall be achieved to the Value of Acquisition & Value of Enchancment and the resultant determine shall be the Listed Value of Acquisition & Listed Value of Enchancment for the aim of computation of LTCG