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Tips on lowering tax liability arising out of profit made by selling a property

Tips on lowering tax liability arising out of profit made by selling a property - property taxes - property tips


Real estate has, over the years, become like any other asset to be bought and sold with the aim of gaining from capital appreciation. While this can give good returns, it can also mean a hefty tax outgo. Irrespective of how the property has been acquired, the taxman looks at each and every real estate transaction.



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Those who churn real estate investments fast are likely to pay the highest tax. This is because if the property is sold within three years of purchase, the short-term capital gain is calculated by deducting from the sale price the cost of acquisition, the money spent on improving the property and the transfer cost.

The gain is included in the taxable income for the year the money is received and taxed according to the person's tax slab.

An investment gone wrong will result in a short-term capital loss. "Short-term loss from sale of a property can be set off against capital gain from any other short- or long term asset during the financial year," says Parizad Sirwalla, partner, KPMG India, a consultancy firm.

The option of setting off shortterm loss against capital gain is a big advantage here. If the current year's capital gain is inadequate, the net capital loss can be carried forward for eight financial years for adjusting against any gain.

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Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.