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Income Tax on sale of house propery

Manjunatha (Nothing) (21 Points)

20 April 2023

One builder has agreed to buy my old property for 80 lakhs and he will pay me 40 lakhs in cash and rest with a 2BHK flat to be constructed on it. Meanwhile I want to buy a ready built flat with the cash and I want to sell the flat once constructed. Whether I have to pay tax now and later again when I am selling the flat. Please guide me on this. Thanks in advance.

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3 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177801 Points)
Replied 21 April 2023

Yes, but only for any gains over the first investment.

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Pranjal Gupta (141 Points)
Replied 21 April 2023

Yes, you may have to pay taxes twice in this scenario. Here's how:

Firstly, when you receive the 40 lakhs in cash from the builder, you will be liable to pay tax on it as it will be considered as income under the Income Tax Act, 1961. The tax will be calculated as per your income tax slab rate. Additionally, there may be penalties or interest imposed if you fail to declare the cash income and pay taxes on it.

Secondly, when you sell the 2BHK flat that will be constructed on your property, you will be liable to pay capital gains tax on the sale proceeds. The capital gains tax will be calculated based on the difference between the sale price and the cost of acquisition (i.e., the value of the old property you sold to the builder).

If you hold the flat for more than two years from the date of completion of construction, it will be considered as a long-term capital asset and the capital gains tax will be calculated at a lower rate of 20% (plus surcharge and cess as applicable) after adjusting for inflation. However, if you sell the flat before the completion of two years, it will be considered as a short-term capital asset and the capital gains tax will be calculated at your income tax slab rate.

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