Long Term Capital Gain on real estate: How to manage profit on house property income

Long Term Capital Gain on real estate: How to manage profit on house property income

In India, a lot of people invest in real estate as it is expected to give a good return in small time. But, while investing they must know about the Long Term Capital Gain (LTCG) that gets levied on the investment with some terms and conditions and some relaxation as well. Otherwise, the entire exercise would fail and the investor may land in trouble due to being unknown to tax and investment rules. Balwant Jain, a Mumbai-based tax and investment expert explained that LTCG is applicable if someone has bought an under construction inventory and decided to sell it after three years, LTCG is applicable.

“If someone has bought an under construction inventory then the LTCG is applicable if he or she decides to sell the property after holding it for three years. However, in case of ready to move in property, the LTCG becomes applicable after two years only,” he told Zee Business Online. Jain said that for the last two years, LTCG for land and ready to move in building or inventory, time for levying LTCG has been allowed to two years. Jain further clarified that for under construction property the period is three years. “If the property is sold before possession, then only the three years period will apply. If it is sold after possession the period will be two years from the date of possession.”

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On how the capital gains can be brought out of tax net Kartik Jhaveri, Director — Wealth Management at Transcent Consultants said, “One can keep the capital gains on real estate investment in the capital gain account in the bank for three years. In these three years, he or she can re-invest the money into another real-estate property. By keeping the money into the capital gain account, one can avail the interest on his or her money as per the interest rate being provided on the saving accounts of the account holders in the bank. Apart from this, to get more gains on his or her capital gains in the real estate investment, one can put up to Rs 50 lakh into the capital gain bonds but the investment has to be done within six months of sale.”

On other benefits that a real estate investor can avail off Jitendra Solanki, a SEBI registered investment expert said, “While accounting your capital gain on real estate property, one needs to deduct the brokerage being paid during the buy and during the sale of the property. Apart from that, one spends on repair and maintenance of the property. It can also be deducted from the original gains. But, for availing these deductions from the capital gains, one needs to have proper bills being raised against his name with proper heads being mentioned.”

Adding on the benefits on LTCG in real estate investment, Balwant Jain said, “If someone has bought a house property within one year before the sale of his or her house property, he or she can use that property to avoid the LTCG being levied on the property he or she has sold.”

[“source=zeebiz”]