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IT Tax Question on 2 self owned properties - Mumbai & Goa

Anil

Anil Rego  |388 Answers  |Ask -

Financial Planner - Answered on Feb 20, 2025

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Asked by Anonymous - Feb 01, 2025Hindi
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As per Budget 2025 I understand that taxpayers can now claim zero tax on 2 self occupied properties. I own two house properties one of which is in Mumbai and the other one is in Goa. I stay in Mumbai flat and my father stay in the Goa flat. The Mumbai flat was purchased in August 2008 and I got possesion of Margao - Goa flat on March 22, 2024. There is no housing loan taken. I am confused after the budget 2025. Since I own 2 properties in my name do I need to pay income tax for Margao-Goa property while filing IT returns for the assessment year 2025-2026 even though my father is staying in Goa flat and its not on rent.

Ans: As per the proposals made in Budget 2025, the taxpayer can easily claim both houses as self-occupied and will not be required to pay any tax. Thus, both Mumbai and Goa flat will be having no tax liability.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Mihir

Mihir Tanna  |1052 Answers  |Ask -

Tax Expert - Answered on Sep 29, 2022

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Dear Mr Mihir, I would like to know the following points: I bought a flat in Thane - 400603 @ rs.one lakh in Dec.'1983 & would like to sell now this year 2022 @ rs.64 lakhs. Pl. let me know the amount of Property Gain Tax (Long Term) which I have to pay now considering 'Ready Reckoner Rate' at Thane - 400603 area or how to calculate the same to get taxable amount? Also can I (as Sr. Ctzn.) get a tax exemption as I already bought (in joint ownership where my wife is 1st owner) another flat @ rs.75 lakh in Thane in Nov '2020? May I invest taxable amount (if any) in Govt. Bonds like NHAI / REC / PFC to get tax exemption & what interest I will get for how many yrs. or else if it will be better to invest my selling amount in good Flexi Cap Mutual Funds for 5 years after paying entire taxable amount to recover the same? Will appreciate your prompt feedback in detail.
Ans: Capital gain on sale consideration will be reduced by Indexed cost of acquisition and allowable expenses incurred on transfer. You have to calculate indexed cost of acquisition by applying Cost Inflation Index as per prescribed formula on cost of acquisition.

For cost of acquisition, you may take actual cost or fair market value of the asset, as on 01.04.2001.

In case of land and building, fair market value on 01.04.2001 cannot exceed stamp duty value as on 01.04.2001.

Exemption is available if amount of capital gain is invested by purchasing a new residential house within one year before or within 2 years after the date of transfer of the residential house.

As you have already got possession of new property in November 2020, you will not be eligible for exemption.

Decision of investment in specified bonds or acquiring tax mutual funds can be taken after considering several factors like risk appetite, amount of tax liability on capital gain, availability of surplus fund etc.

..Read more

Ramalingam

Ramalingam Kalirajan  |8324 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 16, 2025

Money
Sir I purchased a flat in 2006 for 3.6 lakhs as joint ownership with my wife and sold it in March 2025 at 31 lakhs. My wife is a home maker and never a tax payer. Now we have sold the property. What are the tax implication on myself and my wife. I also spent some 1.5 lakhs for improvements but not having any receipts for that flat.
Ans: You're doing the right thing by clarifying the tax implications early.

Your query covers:

Joint ownership of a flat

Long-term capital gains on property sale

Use of improvement costs

Spouse’s tax status

Let us now understand your situation from all possible angles.

Property Was Jointly Owned
Since the property was jointly registered in 2006, capital gains are also shared.

You and your wife will each report 50% of the capital gain — unless you can prove a different ownership ratio.

If the sale deed, purchase deed, and bank entries don’t mention different shares, assume 50-50 for tax.

Your Wife Is a Homemaker
Even though she is a homemaker and has no other income, capital gains are still taxable in her hands.

Income tax law does not exempt capital gains just because the person is a non-earner.

She will need to file ITR-2 for this year and report her 50% share of capital gains.

Purchase Details and Holding Period
Bought in 2006 for Rs 3.6 lakhs. Sold in March 2025 for Rs 31 lakhs.

Holding period is more than 24 months. So this is long-term capital gains (LTCG).

LTCG is taxed at 20% with indexation under property sale rules.

Cost Inflation Index (CII) and Indexation
Your cost of Rs 3.6 lakhs (from 2006) will be indexed using the Cost Inflation Index.

Your indexed cost will increase the original amount, which reduces your taxable gain.

This indexed benefit applies to both of you equally.

About the Rs 1.5 Lakhs Improvement Cost
Technically, improvement costs can be added to your purchase cost.

However, the law requires documented evidence — bills, payment proof, etc.

Since you don’t have receipts, the income tax officer may disallow it during scrutiny.

If you can arrange bank entries, witness affidavits, or even photographs with dates, you may still claim some support.

But to stay safe, don’t rely on this Rs 1.5 lakhs deduction unless you have backup.

LTCG Tax Rate After March 2024 Budget
There is a new LTCG rule starting from April 2024:

Long-term capital gains above Rs 1.25 lakh per person per year are taxed at 12.5%.

Earlier, it was 20% with indexation. But this 12.5% is now the flat rate, without indexation.

This rule change affects equity and property both — depending on interpretation.

For your property sold in March 2025, if this new rule applies, consult a tax expert locally to confirm if indexation or flat rate is better.

Income Tax Filing — What You and Your Wife Must Do
You and your wife must each:

File ITR-2 (not ITR-1) before 31st July 2025.

Report capital gains with details of:

Sale value (your 50% = Rs 15.5 lakhs)

Indexed purchase cost (your 50% = Rs 1.8 lakhs approx with indexation, assumed)

Any TDS deducted by the buyer (check Form 26AS)

If LTCG exceeds Rs 1.25 lakh each, tax applies.

You can invest in Capital Gains Bonds (Sec 54EC) to save tax up to Rs 50 lakhs.

You can also invest in another residential property (under Section 54) to claim exemption.

What About Clubbing Rules?
Some people assume a homemaker’s share should be clubbed with husband’s income.

That is not applicable here, because:

The property was bought in joint name

And the ownership was real, not just name-lending

Hence, capital gains belong to both owners separately

What You Can Do Now
To reduce tax or plan better:

Check if buyer deducted TDS under Section 194-IA (1% of sale value)

If not, ensure you declare the full sale value and pay tax voluntarily

Consider investing in Capital Gains Bonds (NHAI/REC) within 6 months to save tax

Or, if you plan to buy another property, use Section 54 route

Start collecting any supporting documents for improvement cost — even if partial

Both you and your wife must file returns individually — even if she has no PAN yet

If her taxable income is below Rs 2.5 lakhs after capital gain exemption, no tax payable, but filing is still needed

Other Practical Notes
Keep sale deed, PAN of buyer, and bank statements handy

Maintain digital copy of original purchase deed from 2006

Ensure Form 26AS and AIS reflect this transaction — check for mismatches

Consider advance tax payment if gain is large, to avoid interest penalties under Section 234B/234C

Final Insights
You and your wife made a smart real estate investment in 2006.

Selling it in 2025 at 9X returns is financially sound.

But tax on capital gains is unavoidable, even for homemakers.

Indexation, exemptions, and splitting ownership reduce the burden significantly.

Start collecting your data now, even if returns are due in July.

Invest time in filing both returns properly — to avoid scrutiny or notices.

You’ve already done the hard part — buying, holding, and exiting smartly.

Let’s close the loop with smart tax handling.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Asked by Anonymous - May 07, 2025
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Sir, I wqnted your advise, regarding an investment. My building is going for re-development, there is a additional flat sale for about 1cr, which will be ready in about 3 years. Please can you advise is it worth to invest 1cr in additional flat, i have savings of about 1cr, or should i keep the 1cr as Fixed Deposit. I do not have knowledge about investment in mutual funds or SIP. Thanks to advise.
Ans: It's commendable that you're considering the best investment route for your Rs. 1 crore savings. Let's evaluate the options you've mentioned and explore a comprehensive approach to wealth creation.

Understanding Your Investment Options
1. Investing in the Additional Flat

Illiquidity Concerns: Real estate investments are typically illiquid. Selling a property can take time and may not fetch the expected price.

Maintenance and Other Costs: Owning an additional flat comes with recurring expenses like maintenance charges, property taxes, and potential renovation costs.

Market Volatility: Property prices can fluctuate based on various factors, including economic conditions and government policies.

Rental Income Uncertainty: If you're considering renting out the flat, rental yields in many Indian cities are relatively low compared to the property's value.

2. Keeping the Amount in Fixed Deposits (FDs)

Low Returns: FDs offer fixed returns, but these may not outpace inflation, leading to a decrease in real purchasing power over time.

Tax Implications: Interest earned from FDs is taxable as per your income slab, which can further reduce the net returns.

Lack of Flexibility: Premature withdrawal from FDs can attract penalties, limiting liquidity.

Exploring Mutual Funds as an Alternative
Given that you're new to mutual funds and SIPs, it's essential to understand their potential benefits:

Professional Management: Mutual funds are managed by experienced fund managers who make investment decisions based on thorough research.

Diversification: By investing in a mutual fund, your money is spread across various assets, reducing risk.

Liquidity: Most mutual funds offer high liquidity, allowing you to redeem your investment when needed.

Potential for Higher Returns: Historically, mutual funds, especially equity-oriented ones, have offered higher returns over the long term compared to traditional instruments like FDs.

Tax Efficiency: Mutual funds can be more tax-efficient, especially with the benefits available under certain sections of the Income Tax Act.

Recommended Approach
Considering your current situation and the pros and cons of each investment option:

Avoid Investing in the Additional Flat: Given the illiquidity, associated costs, and potential market volatility, investing in another property may not be the most efficient use of your funds.

Limit Exposure to FDs: While FDs offer safety, the returns may not be sufficient to meet long-term financial goals, especially after accounting for inflation and taxes.

Consider Mutual Funds for Wealth Creation:

Start with a Lump Sum Investment: Allocate a portion of your Rs. 1 crore savings into mutual funds, focusing on a mix of equity and debt funds based on your risk appetite.

Initiate SIPs: Set up Systematic Investment Plans to invest a fixed amount regularly, benefiting from rupee cost averaging and disciplined investing.

Consult a Certified Financial Planner: Given your unfamiliarity with mutual funds, seeking guidance from a certified professional can help tailor an investment strategy aligned with your financial goals.

Final Insights
Your initiative to seek advice before making a significant investment decision is commendable. By steering clear of additional real estate investments and limiting exposure to low-yield instruments like FDs, you can explore avenues like mutual funds that offer the potential for higher returns and greater flexibility. Engaging with a certified financial planner can further ensure that your investment strategy is well-aligned with your long-term financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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