I bought a property sometime in 2014 for 24 lakhs, the property value in the market is 55 lakhs now? I have cleared the loan of 24 lakhs But now I have bought another property and have 49 lakhs loan on that and want to sell the first one and adjust against this loan? How does it work? Any help and information is appreciated ????

Ans: Transfer of self occupied house property being capital asset is taxable under the head Income from capital gain. As property was held for 20 years, it will be long term capital gain taxable @20% plus applicable surcharge cess. Capital gain will be difference of Sale consideration reduced by indexed cost of acquistion.

You can calculate indexed cost at following link -
https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

Further, if gain amount is invested in buying another property and other conditions are fulfilled, exemption can be taken u/s 54.

Ans: You have a home loan, car loan, and a personal loan. The combined EMIs are significant. You also invested Rs 32 lakh from selling an old property.

Evaluating Loan Repayment Strategy

Paying off your home loan with the proceeds from your old property could have been beneficial. Home loans have a long tenure and higher interest outgo. Reducing the principal early can save a lot in interest. Let's explore your current situation and alternatives.

Current Loan Commitments

Home Loan: Rs 65 lakh, EMI of Rs 67,000, tenure of 14 years.

Car Loan: EMI of Rs 24,000, balance 25 months.

Personal Loan: EMI of Rs 22,000, balance 25 months.

Analysing Investment in Bangalore Property

You invested Rs 32 lakh in Bangalore property, taking an additional Rs 8 lakh gold loan. This may have increased your debt burden. Property can be a good investment, but consider liquidity and returns.

Benefits of Paying Off Loans

Reduced Interest Burden: Paying off loans early saves interest. Home loans have long tenure and compound interest.

Improved Cash Flow: Reducing EMI obligations frees up monthly income. This can be redirected to savings or investments.

Impact of Current Debt Obligations

High EMI Burden: Combined EMIs are Rs 1,13,000 per month. This is a significant portion of income, limiting other financial goals.

Interest Outgo: High interest on personal and car loans increases financial strain.

Suggested Financial Strategy

Prioritise High-Interest Loans
Focus on clearing the personal and car loans first. They have higher interest rates and shorter tenures.

Use any available savings or additional income to prepay these loans.

Home Loan Management
After clearing personal and car loans, focus on reducing home loan principal. This can be done through partial prepayments.

Use bonuses, increments, or any lump sum income to make extra payments.

Review Bangalore Property Investment
Assess the potential returns and future prospects of the Bangalore property.

If it does not meet expectations, consider selling it and using proceeds to clear debts.

Emergency Fund
Maintain an emergency fund to cover at least 6 months of expenses. This provides a safety net in case of unforeseen events.
Systematic Investments
Once loans are under control, start systematic investments. This can be in mutual funds, PPF, or other suitable options.

Ensure diversification to balance risk and returns.

Final Insights

You have taken on significant debt obligations. Prioritising loan repayments, especially high-interest ones, is crucial. Evaluate the investment in Bangalore property and consider liquidity and returns. Gradually, free up your cash flow and redirect it to systematic investments for long-term growth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Yes long term loss from one type of capital asset can be set off against long term gain from other type of capital asset.