Tax implication of selling self owned properties

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 June 2010 In 2005 I blocked a property. It was registered in financial year 2006-07 and since then I claimed tax benefits with respect to the interest paid as self occupied property. I have claimed benefits for the fin years 2006-07, 2007-08, 2008-09
and 2009-10
Now I have moved to a different city and want to sell the property. My questions are as follows:

1. What are the long term capital gains tax implications in selling the property now? How does indexation work?
2. If I take the gains of the sell and start paying for another property that I have booked over the next 1 year then do I owe any capital gains tax?
3. What are the implications of the tax benefits I have enjoyed as a self occupied property? Do I have to give back the tax arising from the income loss?
4. Can some one help me with the rough calculations around this?

Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
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21 June 2010 I am repying pointwise on your query

1. For Long term capital asset as per Section 2(29) you need to sell it atleast after 3 years except shares, mutual funds etc. So if you sold the property after 3 years then Indexation will be allowed.

2. As per Section 54 if you purchase another residential house 1 year before or 2 years after sale or construction is completed within 3 years then exemption will be allowed. Amount of exemption will be equal to the amount of investment in new house and balance capital gain will be taxed u/s 45(1).

3. All those deduction which you have taken u/s 24(b) or 80C earlier will not be considered here.

4. For rough calculation suppose the Sale consideration is 80L and ICOA is 60L. Then if you invest Rs. 20L or more than there will be no capital gain.

Querist : Anonymous

Querist : Anonymous (Querist)

23 June 2010 I am not clear on #3. Do I have to return the tax beneefits to the government?

Someone told me that there was a 5 year limit on this. Appreciate your confirmation

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Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
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23 June 2010 There is no need to return the benefits you have taken but you will not get any benefit after selling it. I am not understanding in what sense you are saying 5 years limit.

To the best of my knowledge 5 years limit is for pre incorporation expenses and once you sell the property you will not be able to get the benefit of it.

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