I had one house and two flats. I sold one house in May 2023. I sold one flat in August 2023. My house sale gave me a capital gain and my flat sale gave me a capital loss. I have three questions. 1. Can I net out the capital gains by deducting the loss on sale of my flat 2. Can I invest in a new flat for the net capital gains amount to get exempt from paying capital gains tax. 3. If answer for 2 is no, can I invest in 54EC bonds to get exemption from paying capital gains tax

Ans: Yes, you can claim tax exemption on sale of residential plot by investing capital gain amount in specified bonds within 6 months of transfer of plot subject to upper limit of Rs 50 lakh of FY 22 23 and other specified conditions.

Ans: Yes

Ans: Hi Alok
Buying a plot is not considered as reinvestment and eligibility is on buying or constructing a residential house.

In this case if you construct a house on the plot then you could map the capital gains from the sale of the ancestral house against the cost of construction of the house on the plot.

Also, as you have sold the house in March 2023, you would need to open a Capital Gain Accounts Scheme (CGAS) account with any nationalized bank on or before the due date for filing your tax return. The deposit of the capital gain amount in the CGAS account would be treated as reinvestment for the moment.

You need to note that this CGAS account amount has to be utilized for construction within 3 years from the date of sale of the ancestral house.

In case you are not depositing the amount in CGAS account or reinvesting in any eligible assets before filing tax return (of course before due date) then you would need to pay tax on the capital gain portion

Ans: You need to understand the following things about taxation of your flat:-
1. You have earned a profit (called capital gains in this context) on the sale of your house. So tax is due.
2. However, tax will not simply be 31L – 8.5L. The Govt gives you an advantage of inflation over the years which increases your purchase cost through a process called ‘Indexation’, thus decreasing your tax. Please google and read up on it, or contact a good CA or a financial advisor.
3. You also get credit for registration and stamp duty charges, brokerages paid as also any improvements done in the house of a permanent nature.
4. Please read up on Income Tax Section 54 which also gives out how you can save tax on your final capital gains arrived at.
5. The entire calculations and sale/purchase details have to be shown in the ITR. Most probably you will be filling ITR-2 for this next year but please ascertain the same when you are about to file the tax since rules keep changing.

Ans: The TDS (Tax Deducted at Source) of 1% on the sale of property exceeding Rs 50 lakhs is applicable on the full sale consideration. In your case, since the total sale consideration was Rs 5,973,000, the TDS of Rs 59,730 was deducted as per the guidelines. Based on the information you've provided, you might be liable for Capital Gains Tax. Capital Gains Tax is calculated based on the difference between the selling price and the indexed purchase price. The indexed purchase price adjusts the original purchase price for inflation over the holding period.
The tax on long-term capital gains is usually 20% (plus applicable surcharge and cess) after considering any exemptions or deductions available under Section 54 or Section 54F if you are not investing in another property or capital gains bonds.

To close the transaction and fulfill your tax obligations, you should consider the following steps:

a. Calculate Capital Gains: As explained above, calculate the capital gains based on the indexed purchase price and selling price.

b. Pay Capital Gains Tax: If you decide not to invest in another property or capital gains bonds, you will need to pay the applicable capital gains tax. You can do this by filling out the appropriate sections in your income tax return and paying the tax amount.

c. File Income Tax Return: Ensure that you accurately report the capital gains in your income tax return for the assessment year.

d. Keep Documentation: Maintain all relevant documents related to the property sale, purchase, and tax calculations for future reference