Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
Gain or profit arising from the sale of any asset (in this case, property) is called capital gains. Real estate owners must pay capital gains tax while selling their property. The tax gets levied on the property sale proceeds as a deal resulting in profits for owners. Under the law, a holding period is a time for which the property is held before selling. It has a quintessential role to play while deciding the overall tax liability.
If you wish to sell the property, it is time to pay the capital gain tax on the profit earned upon considering the indexation and inflation benefit. Nonetheless, there are provisions available for saving on the tax on the sale of real estate. Capital gains get classified as long-term or short-term capital gains.
When you sell the property or land within thirty-six months of acquiring it, it gets considered a short-term capital gain. When you sell it after the completion of 36 months, it gets classified as a long-term capital gain. The difference between long-term and short-term capital gain is imperative as both get treated individually considering the taxation terms. The tax benefits and rates are applicable on reinvestments of the two types of gains, which may vary.
The long-term capital gains on property sales get taxed at 20% added with a 3% cess when the sale fulfils some conditions. In case you sell a gifted or inherited property, you still are liable to pay the capital gains tax. In that case, the cost gets calculated based on the previous owner’s cost indexed to the purchase year.
Saving capital gains tax: Tips to follow
• Capital gains get used for purchasing or constructing another property
• A new house gets purchased a year before/ 2 years after the old house’s sale
• The new house gets constructed within three years after the old house’s sale
• Only an additional house property gets constructed or purchased
• You do not sell your new house for three years after taking the possession
• When the new property’s cost is lesser than the amount of sell, the exemption applies proportionately.
The long-term capital gains remain exempted from taxation for people and undivided families in case of the above conditions.
