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Capital Gains Demystified!

Capital Gains


The last quarter of the financial year it a time for most individuals to complete there tax assessments for the concluding year.


For anyone who has recently sold a property or is planning to sell, capital gains tax would naturally be at the top of your mind. Given below are some details and points that would make it easier for you to plan your sale, tax and future investments.


  • If you sell a property before 24 months from date of purchase it will be treated as a short term capital gains (or loss). If you sell a property after 24 months from the date of purchase it will be considered as long term capital gains (or loss)
  • LTCG or STCG is calculated on the difference in the total sale value of the property with the total cost of purchase of property including cost of registration, renovation etc.
  • LTCG in India is taxed at a fixed tax rate of 20% of the difference in sale and purchase value. STCG is added to the taxable income of the current financial year and taxed according to a persons tax slab.
  • Capital Gain from sale of one property can be offset by any capital loss on sale of any other property during the similar time period.
  • To offset the capital gains from sale of any property, the exceeding amount (profit) needs to be invested in another residential property within a period of 2 years (for a ready residential purchase) or within 3 years in case of purchase of an under construction property. The new property cannot be sold for a minimum period of 3 years from the date of purchase of property.
  • In case you do not purchase another property within the specific time period you can deposit the exceeding amount into a capitals gains account in a scheduled bank or in certain government designated infrastructure bonds.
  • For calculation of the profit, in case the original property is sold after a long time gap from the date of purchase of property, it original purchase price indexed for inflation for the purpose of calculation of profit amount.
  • Capital gains exemption is only available on purchase of one property.