I purchased a house in May 1999 for 4 laks on GPA with joint name with my wife. I paid the installments also on various dates. Then I constructed it for around 8 lakhs in 2000 year. Sale deed was done in Dec 2014. I have sold it for 4250000 in December 2023. Shall I have to show it some where in my/my wife ITR? Will there be any tax liability? Please guide me. Thanks

Ans: If you sell your old house in January-2025 (Registered Deed), you will have to complete the purchase process (by getting it Registered in your name) of house (with 25% your share) with in 2 years from January-2025. This will enable you to claim deduction u/s 54 to save LTCG.
The exemption shall be available for Rs.55.00 lakhs (25% share in purchased property) or your LTCG on sold house, which ever is less.
Most welcome for any further clarifications. Thanks.

Ans: Current Situation and Potential Tax Implications
Joint House Purchase: You purchased a new property in June 2023 jointly with four family members. It will be completed by December 2026, with a total cost of Rs 2.2 crore.

Loan and Payments: A home loan has funded Rs 1.1 crore, and payments continue towards the installments.

Old House Sale Delayed: Your plan to sell an old house by June/July 2024 has been delayed, but you expect it could be sold by December 2024 or January 2025.

The sale timing is critical, as it affects tax calculations and investment strategy.

Understanding Capital Gains Tax on the Old Property Sale
If you sell the old house in the next few months, consider these points:

Long-Term Capital Gains (LTCG): If you held the old property for more than two years, the gain qualifies for long-term capital gains tax. The LTCG rate is 20% with indexation benefits, helping reduce the taxable amount.

Section 54 Exemption: If you invest the capital gains from selling the old house into a new property (your under-construction home), you may be eligible for a Section 54 exemption. This reduces or eliminates the tax burden.

Time Limits for Exemption: Under Section 54, the new property must be purchased one year before or two years after the old property’s sale date. For under-construction properties, the new home must be completed within three years of the sale. Since your home is scheduled for completion by December 2026, it may fall within this time frame for exemption.

Steps for Managing Installment Payments and Tax Considerations
To efficiently manage your installment payments and minimise tax liabilities, here are some key strategies:

Use Sale Proceeds for Installments: Once you sell the old house, allocate the proceeds to pay off the remaining installments of your new home. This method supports your Section 54 exemption, as the capital gains directly fund the new property.

Utilise Capital Gains Account Scheme: If the old house sale happens before the new home’s completion in December 2026, consider a Capital Gains Account Scheme. This scheme holds your gains until you’re ready to pay the final installments, allowing you to maintain the tax exemption.

Avoid Tax Penalties: By reinvesting the capital gains directly or through a Capital Gains Account, you stay aligned with the tax-exempt limits. This approach prevents tax penalties on unutilised gains.

Loan Repayment Strategies and Their Benefits
With an existing home loan, you have options for managing debt effectively:

Partial Loan Prepayment: If selling the old house frees up significant funds, consider partially repaying the home loan. Reducing the loan principal lowers interest obligations and eases financial pressure.

Maintain Liquidity: If your income sources post-retirement are limited, focus on balancing loan repayment with cash reserves. Avoid exhausting all funds on prepayments, as liquidity will support unforeseen expenses.

Interest Deduction Benefits: Home loan interest qualifies for tax deductions up to Rs 2 lakh per annum. So, if tax-saving on other income is beneficial, maintaining the loan could serve dual purposes.

Planning for Additional Financial Needs
You may have specific financial goals or family obligations. These plans ensure financial security alongside the property investment.

Consider Your Age and Income Needs: At 68, it’s essential to preserve funds for retirement. Make sure your reserves meet monthly expenses comfortably.

Health and Emergency Reserves: Reserve a portion of the proceeds or capital for health and emergency funds. These ensure stability, especially if unforeseen expenses arise.

Future Property Maintenance: Anticipate expenses related to the new property after completion, including maintenance and repairs.

Investment Strategy Post-Sale
If the old property sale yields surplus funds beyond the installment payments, strategically investing this surplus can optimise your finances:

Allocate to Mutual Funds for Growth: Investing some amount in mutual funds, with guidance from a Certified Financial Planner, can grow your wealth with tax-efficient returns. Actively managed funds offer the potential for better gains than traditional deposits.

Explore Debt Funds for Stability: Debt funds provide relatively stable returns, which are also tax-efficient. These funds suit conservative investors who prefer less market volatility.

Avoid High-Risk Products: Given your age, high-risk investments (like equities) may not align with your risk tolerance. Focusing on balanced or debt-oriented funds can offer stability with some growth potential.

Ensuring Compliance with Taxation Rules
To maximise tax savings while remaining compliant, consider these best practices:

Work with a Certified Financial Planner (CFP): A CFP can help navigate the specific tax exemptions, handle instalment planning, and advise on re-investing sale proceeds effectively.

Documentation and Filing: Maintain detailed records of the new property payments, loan interest, and any transactions related to the sale proceeds. Accurate records support tax filing and Section 54 claims.

Plan Ahead for Final Payments: Since you still have 2-3 instalments due, ensure funds from the old property sale remain accessible. This keeps the payment process smooth and helps you avoid penalty charges or tax complications.

Final Insights
Selling the old property offers a structured approach to fund your new home. It also offers potential tax benefits when done with thoughtful planning.

Utilise Capital Gains Exemptions: Applying Section 54 can save significant taxes, especially as the new property aligns with your long-term plans.

Balance Loan Repayment with Liquidity: Repay loan portions wisely without sacrificing cash reserves. This balance supports both current needs and future obligations.

Explore Moderate Investments for Surplus Funds: Any surplus should be invested in tax-efficient, moderate-risk avenues that align with retirement security.

Best Regards,
K. Ramalingam, MBA, CFP

Chief Financial Planner

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

Ans: 01. In this case, you would be subjected to LTCG (Long Term Capital Gain) tax.
02. To work out LTCG, you should reduce its Cost from the Sale proceeds (Rs.165.00 lakhs).
of property, which was costed to your mother.
03. However, following details may help you to assess your tax liability.
Under present provisions of Income Tax Act, you may opt any of the options (Long Term
Capital Gains), as under :
(a). Tax Rate 12.50% without indexation or
(b). Tax Rate of 20% with Indexation.
04. You may calculate your tax liability under both options & may opt for the tax regime, where tax liability is minimum.
05. To avoid tax, you may invest in purchase of some house property. Exemption available would be minimum of Cost of new house property or the LTCG, which ever is less.
06. You have the option to purchase Capital Gain Bonds of NHAI etc., for tax saving.
07. Most welcome for any further clarifications. Thanks.

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