Dear Client,

If you trnsfer the vacant land asset within 3 years not holding for 36 moths  atleast you areliavble for short term Capital Gainst Tax.After 3 year from th edateof purchaee you transsfer the property by way of sale for valuable xonaidration you are liable to pay ;long term Capital Gains Tax at the  tax slab raIe of 20%. I'm giving the provisions  pertaining to  short term capital  gains and  long term capital gains in resapect of sale of  vavant land or plot. term capital gains and how to save taxes on longterm capital Gains

How to save Capital Gains Tax on Sale of Land / House Property?

Last updated: June 13, 2016 | by Sreekanth Reddy 346 Comments

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Capital asset typically refers to anything that you own for personal or investment purposes. It includes all kinds of property; movable or immovable, tangible or intangible, fixed or circulating.

Examples include a house, land, household furnishings, stocks, bonds or mutual funds held as investments etc.,

When you sell a capital asset, the difference between the purchase price of the asset and the amount you sell it for is a capital gain or a capital loss. Capital gains and losses are classified as long-term or short-term.

If Land or house property is held for 36 months or less then that Asset is treated as Short Term Capital Asset. You as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL) on that investment.

If Land or house property is held for more than 36 months then that Asset is treated as Long Term Capital Asset. You will make either Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) on that investment.

You may have to pay Capital Gains Tax on STCG / LTCG.

In this post let us understand – How to calculate Short Term capital gains on sale of land or property? How to calculate Long Term Capital Gains on sale of land or house? What are the applicable capital gain tax rates on sale of land / house property? How to avoid / save / minimize capital gains tax on sale of land or flat?

How to calculate Capital Gains on sale of Land or House property?

Short Term Capital Gains Calculation is calculated as below:

STCG = Total Sale Price – Cost of acquisition – expenses directly related to sale – cost of improvements.

Long Term Capital Gains Calculation;

The LTCG calculation is similar to STCG. The only differences are, you are allowed to deduct Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price and also claim certain exemptions to save capital gains tax.

(Indexation is done by applying CII – cost inflation index. This increases your cost base ie purchase price and lowers your gains. Your purchase price is adjusted for the impact of inflation.

How do you calculate the indexed cost of purchase? The indexed cost is calculated with the help of a table of cost inflation index.

Divide the cost at which you purchased the Property by the index as on the date of the purchase. Multiply this by the index as on the date of sale.

For Example : If purchase year is 2011 and year of sale is in Financial Year 2015. Then indexed cost of purchase would be –

Indexed cost of purchase =  (Purchase price / 785 ) * 1081. Below is the Cost Inflation Index Table from 1981 to FY 2015-16 for your reference.)

(Latest Cost Inflation Index for FY 2016-17. CBDT has notified Cost Inflation Index for Financial Year 2016-17 / Assessment Year 2017-18 at 1125 . Cost Inflation Index for Financial Year 2015-16 was 1081, so it’s an increase of 44 in Cost Inflation Index.)

Applicable Capital Gains Tax Rates on Sale of Property.

YOU CAN SAVE ON TAX BY INVESRTING  IN HOUSE PROPERTY FOR SELF OCCUPATION OR rURAL #ELECTICITY bONDS OR NATIOANAL hIGH WAY AUTHORITY bONDS UNDER sECTION 54, 54 EC or 54 F. of IT Act.

• Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.
• Long Term Capital Gains are taxed at 20%.

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