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Worried About Capital Gains? You Can Minimize Your Tax With These Tips!


by SA Homes, Posted on 25/10/2016



If you have recently sold your flat in Palakkad, or anywhere in the country, and if you have made a profit on that sale, you may be liable to pay a 20% Capital Gains Tax to the Government on India.

However, your entire sale proceeds is not taxed; only the capital gains. For example, if you bought some property for 20 lakhs, and sell it for 50 lakhs after 10 years, your profit is 30 lakhs. 20% of that amounts to 6 lakhs –a substantial sum!

But the Government has provided ways and means to reduce the burden of tax. Let’s examine them:

• You can adjust the sale price against the cost of inflation. The inflation index is provided by the Government. After all, inflation causes a natural price rise of all products. The actual or indexed cost of the sold property is arrived at like this: Cost of the property x (cost inflation index of the year when property is sold /cost inflation index of year when property was bought).

• You are allowed to deduct the registration and brokerage fees, cost of improvements, or other costs you may have incurred to facilitate the sale. These deductions will significantly reduce your tax burden. Let’s say that you incurred 5 lakhs as cost of the sale, and got a further 15 lakhs reduced for the inflation index, it brings your capital gains down from 30 to 10 lakhs.

• If you buy an apartment in Kalpathy, or for that matter, any property anywhere in India, and invest your entire capital gains in doing so, then you have zero tax liability. Bear in mind however, that this investment must take place within one year from the date of sale. If you have bought another property one year prior to the sale of your property also, you can claim this deduction.

• You can construct your own house using the sale proceeds; as long as your entire capital gain is used for the construction, you will not have to pay tax. The construction must be completed within 3 years from the date of sale. However, both these exemptions are allowed provided there is no other property registered in your name.

• If you already own some property, you can either invest your capital gain in Capital Gains Bonds or deposit it in the Capital Gains Account Scheme available in scheduled banks. The bonds earn interest of 6%, which is taxable. Your investment must be made within 6 months from the date of sale and you cannot withdraw your investment for at least 3 years.

If you’re looking at Palakkad apartments, look no further than SA Homes. We have premium 2 and 3 BHK flats in the best locations in Kalpathy and other areas. Check out our completed projects. To speak to a representative, call us on +91 9400 228 228 now.



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