Selling your house doesn’t have to mean losing a chunk to taxes. Follow these proven methods to save!
1. Reinvest and Save Under Section 54
Use capital gains to purchase or construct another residential property.
- Time Limits:
- Purchase: 1 year before or 2 years after sale.
- Construction: Within 3 years of sale.
- Special Rule: For gains under Rs 2 crore, invest in up to two houses.
Table: Timeline for Tax Exemption
Action | Time Limit |
Purchase | 1 year before/2 years after sale |
Construction | Within 3 years |
Tip: Keep proper documentation for seamless claim processing.
2. Tax-Free Bonds for Safe Investments
Section 54EC provides exemptions through investments in specified bonds:
- Invest capital gains within six months.
- Hold bonds for at least five years.
Eligible Bonds:
- REC bonds.
- PFC bonds.
- IRFC bonds.
Example: Minimize Tax Impact
Mrs. Meera sold a property for Rs 90 lakh, with indexed acquisition costs of Rs 30 lakh.
- Capital Gains: Rs 90 lakh – Rs 30 lakh = Rs 60 lakh.
- Savings: Reinvest Rs 60 lakh in bonds or buy a new house to claim exemptions.
3. Use CGAS to Avoid Immediate Tax Payments
Unable to reinvest before the tax deadline? Deposit the amount in CGAS.
- Funds remain eligible for future investment.
- Ensure compliance with prescribed timelines.
Did you know? Tax-saving bonds are a low-risk option for senior citizens to safeguard their wealth.
Implement these strategies to save taxes and maximize profits from your property sale. Always consult a tax expert for personalized advice.