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Hidden Costs of Selling a House
May 28, 2018
Many people know how to get a home loan and what are the various costs associated with the purchase. However, only a few realize that costs are involved even when you sell a house or any other property.
When you sell a property, then you have to pay taxes. For instance, if you sell it with 3 years of purchase, then you have to pay Short Term Capital Gains (STCG) tax as per which the profits will be added to your annual income and tax has to be paid on the total amount as per the appropriate tax slab.
If you sell a property after 3 or more years have passed since the date of purchase, then you have to pay Long Term Capital Gains (LTCG) tax. It is a flat 20% tax after the adjustment of gains for inflation.
Can you avoid the taxes?
Yes, it is possible to avoid the payment of taxes but only in select situations. For instance, if you use the profits from the sale of a house for the purchase of a new house within the next 2 years or to build another house in the next 3 years, then you don’t have to pay any tax. However, any amount that is left after the purchase/constructed will be considered as taxable income.
Understanding the TDS Implications
To tackle the problem of tax evasion, the government has made it mandatory for the buyers to deduct a TDS of 1% on the purchased properties when the amount is more than Rs. 50 lakhs. However, it’s up to you to ensure that the buyer actually deposits the amount with the IT department so that you can claim the refund if applicable.
Sale of a property is a big decision, especially in terms of finance. Thus, it’s usually better to consult a professional before signing on the dotted line.
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