I bought a 2-bedroom flat in Mumbai in December, 2018 by residence mortgage from HDFC. Since then I’m availing tax rebate on compensation of mortgage and curiosity. Now I wish to promote this flat to buy one other three mattress room flat. Will I’ve to return the tax advantages availed from December, 2018 until date if I promote this flat? What are the opposite tax implications of the proposed transaction?
As per Section 80 C of the Income Tax Act, in case you promote a home, bought with residence mortgage, inside 5 years from the top of the yr through which it was so bought, all the advantages in respect of compensation of such residence mortgage availed beneath Section 80 C shall turn into taxable within the yr through which you promote such flat. So in your case any quantity of principal compensation claimed beneath Section 80 C shall turn into taxable through the yr of sale. Please observe that there isn’t any comparable provision for levying earnings tax in respect of tax advantages claimed for curiosity on residence mortgage. So any tax profit claimed by you beneath Section 24(b) in respect of curiosity shall not turn into taxable now.
Since you might be promoting the home after finishing 24 months, income if any made on this shall be handled as long run capital positive factors. As per Section 54 of Income Tax Act long run capital positive factors on sale of a residential home are exempt if the capital positive factors are invested in shopping for one other residential home inside specified time. In case your funding in new home is the same as or greater than such listed long run capital positive factors, all your long run capital positive factors will probably be tax free. Please observe that the funding for buying new home might be made inside a interval of three years from the date of sale of the flat. However, in case you aren’t capable of make the most of full quantity of capital positive factors earlier than the due date of submitting of your earnings tax return, it’s important to deposit the capital positive factors to the prolong not so utilized in an account beneath “Capital Gains Account Scheme” with a financial institution.
Balwant Jain is a tax and funding knowledgeable and might be reached on jainbalwant@gmail and @jainbalwant on Twitter.com.
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