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Bought a house and selling before 5 years

Vasudev (Project Manager) (32 Points)

03 January 2017

I have bought a flat in Feb 2013 and have been claiming income tax benefits under let out property. My Loan 34.5 Lakhs, interested paid so far 12 Lakhs, rent received around 4.2 Lakhs, I m planning to sell the flat now (sales price less than cost incurred - I m ok with it) and planning to buy a individual house worth 90 Lakhs immediately. What are the tax implications? Do I have to repay all tax benefits, though I am reinvesting?

or

if I plan to buy another house at a lower cost (without selling above mentioned one), can I claim tax exemption for both houses.

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4 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174477 Points)
Replied 04 January 2017

1. When you sale house within 5 years from the end of financial year of purchase, any deduction claimed under Section 80C in respect to principal repayment of housing loan, would get reversed and added to your annual taxable income in the year in which the property is sold and not the interest benefit you claimed u/s. 24(b).

If you have not claimed any principal repayment of home loan u/s. 80 C, no question of reversal of any tax benefit. So, check that part first and take call.

2. You can claim tax benefits of home loan repayment for both houses, as at least one would let out.

3. A better solution would be, purchase new house (bigger one as planned earlier), may be on home loan; after April 2017, and plan to sell/ give posession of your old flat after March 31, 2018, but within one year from the purchase of new flat, the benefit of 80C claimed in old flat will not be reversed, at the same time exemption u/s. 54 would be available over LT cap gain.

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Vasudev (Project Manager) (32 Points)
Replied 10 January 2017

Thank you, I believe I will have to shell out Rs.45k if I sell the house now.

Vasudev (Project Manager) (32 Points)
Replied 10 January 2017

Thanks for Dhirajlal Rambhia for reply, I bought this flat in Feb 2013, I was charged interest alone in Mar 2013,

Financial Year 1 - 2012-13,

Financial Year 2 - 2013-14,

Financial Year 3 - 2014-15,

Financial Year 4 - 2015-16,

Financial Year 5 - 2016-17

As Dhirajlal Rambhia said "When you sale house within 5 years from the end of financial year of purchase", So, If I sell this flat in Apr 2017, technically, I need not repay 80C deductions, am I right?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174477 Points)
Replied 11 January 2017

No. For Feb 2013 purchase, (.........5 years from the end of financial year of purchase, ...), to retain the 80C claims during these period, you will have to wait till March 2018. So read care fully, I have mentioned to give possession not before March 2018.

"3. A better solution would be, purchase new house (bigger one as planned earlier), may be on home loan; after April 2017, and plan to sell/ give posession of your old flat after March 31, 2018, but within one year from the purchase of new flat, the benefit of 80C claimed in old flat will not be reversed, at the same time exemption u/s. 54 would be available over LT cap gain."

But I had suggested you a way to fulfill your wish to purchase new flat in near future, without loosing 80C claim and even getting exemption u/s. 54.

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