Selling a house? Know the important amendments made in capital gains tax

Selling a house? Know the important amendments made in capital gains tax
If you incur profits from selling a real estate property after three years of purchasing it, then you have to pay long term capital gains tax. The Finance Bill 2014 has made amendments in the capital gains tax rules making it difficult for all who are planning to sell properties. In case, you are planning to sell your house then you are not going to get the tax benefits you used to get earlier due to the amendments.

A. Tax exemption on only one residential house

Long term capital gains from immovable property are exempted from tax if you buy another residential property. But you have to buy the second property within one and before two years from the date you sold the first property.

Before the amendment

Earlier, there was no such restrictions on how many residential properties anywhere in the world you could buy to reinvest the capital gain. So, you could acquire more than one residential properties and claimed the entire amount for tax relief.

After the amendments

But now, you can claim tax exemption on only one residential property only in India with the capital gains to avoid paying the long term capital gains tax. So, even if you buy more, only one residential property will get tax deduction benefits.

B. Tax benefits on bonds up to Rs. 50 lakh

Long term capital tax gains from real estate are exempted if you invest the capital gains in specified bonds. In order to claim tax benefits, you have to invest in bonds either within 6 months of selling your property or before filing your tax return, whichever comes first.

Before the amendments

Earlier you could invest Rs. 1 crore (Rs. 50 lakh each in a financial year for two consecutive years) in bonds. Tax benefit was available on the entire amount of Rs. 1 crore.

After the amendments

But now, you are eligible to invest only up to R. 50 lakh on capital gains bonds in a financial year. The total exemption is now restricted to Rs. 50 lakh. If you invest any amount above the stipulated limit then you need to pay long term capital gains tax.

C. Tax on forfeited token money

Some amendments have been made on taxes regarding any advance received during the booking of a property which later forfeited and the transfer of property did not take place.

Before the amendments

Earlier, the forfeited amount could be reduced from the cost of acquisition in the year of sale of the property.

After the amendments

Money received as advance during negotiation period of transferring the capital asset and if the sum is forfeited and transfer of capital does not take place then the amount of money will be treated as income from other sources.

Click here to read on more points to remember if you are planning to sell your house. 


The amendments will be applicable from the assessment year 2015-16. So, if you want to sell your house then you must carefully decide on how to save taxes on long term capital gains.

Read more about: capital gains tax, property, bond
Story first published: Tuesday, August 5, 2014, 11:48 [IST]
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