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Capital Gain Tax on House property


As we know there are two types of capital gain, i.e.:

1.Long term Capital Gain/Loss          2.Short term Capital Gain/Loss

Any Capital Asset held by the tax payer for a period less than or equal to 36 months, it is termed as Short Term Capital Asset, thus the gain/loss arising on sale / transfer of STCA is categorized as Short Term Capital Gain/Loss.
On the other hand, any Capital Asset held by the tax payer for a period more than 36 months, it is termed as Long Term Capital Asset, thus the gain/loss arising on sale / transfer of LTCA is categorized as Long Term Capital Gain/Loss.

However, in respect of certain assets like shares (equity or preference) which are listed in a recognized stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.

In this article we shall deal only with House as a capital asset and will try to understand the tax implication arose at the time of transfer of house property.

Long Term Capital Gain/loss on House Property:

LTCG is taxed @20% (plus surcharge and cess as applicable).
Below is the format for calculating the LTCG on transfer of House Property:

Particulars Rs
Full value of consideration (i.e., Sales consideration of asset) xxx
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, advertisement expenses, etc.) . xxx
Net Sale Consideration xxx
Less: Indexed cost of acquisition xxx
Less: Indexed cost of improvement if any xxx
Long Term Capital Gain xxx


Special Points to remember:

  • LTCG can be adjusted against Basic Exemption Limit only after adjustment of other head income. This benefit is available only for Resident Individual and HUF.
  • No deductions u/s 80C to 80U is applicable for LTCG.

Exemption from tax on House property:

Section 54 of Income tax act provide exemption to the tax payer on Gain arising from sale of residential house property held for more than 36 months by acquiring another residential house.

Following are the basic conditions to be satisfied to avail the exemption:

  • This benefit is applicable only for individuals and HUF
  • The transferred asset should be a LT capital asset being residential House property.
  • Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
  • With effect from assessment year 2015-16 exemption can be claimed only in respect of one residential house property purchased/constructed in India. If more than one house is purchased or constructed, then exemption under section 54 will be available in respect of one house only.

Short Term Capital Gain/loss on House Property:

Short Term Capital Gain will be included in assesses total income and will be taxed according to the applicable tax slab.