I purchased a home in 2012 and bought it at a loss in 2021. The circle price was increased than my promoting value. Can I declare long-term capital loss (LTCL) from the sale of the property and set it off in opposition to long-term capital positive aspects (LTCG) in shares or different monetary investments? How will the upper circle price have an effect on my losses? Can I set off the losses from the above sale in opposition to the sale of one other property wherein I’m prone to have LTCG tax? Can I make investments the proceeds from the home sale in capital markets, as I do not need any long-term or short-term capital positive aspects? What are the tax implications of promoting a home property at a loss?
—Vandana
We perceive that the property you bought was a residential home. As you held the property for greater than 24 months, the asset shall be thought of as a long-term capital asset and losses arising from its sale could be taxable as long-term capital loss (LTCL) in your fingers.
The LTCL from the sale of such a residential home will likely be computed because the distinction between web sale proceeds (sale proceeds much less brokerage bills) and the listed value of acquisition and enchancment. The listed value of acquisition of the asset in your case could be calculated as value of acquisition / value inflation index (CII) of yr of acquisition * CII of yr of sale. (CII prescribed for FY2012-13 and FY2021-22 are 200 and 317, respectively).
Please word if the precise sale consideration is decrease than the stamp obligation worth by greater than 10%, for the aim of above calculations, the stamp obligation worth could be considered the deemed sale consideration.
Accordingly, in your case, if the precise sale consideration is decrease than the stamp obligation worth by greater than 10%, then the stamp obligation worth shall be deemed to be the sale consideration for the aim of the above-mentioned computation of LTCL.
If the calculation leads to LTCG, the identical could be taxable in your fingers at 20% (plus relevant surcharge and cess) on the ensuing LTCG (web quantity set off from any previous or present yr eligible losses).
There is not any restriction below the earnings tax legal guidelines on investing the sale proceeds of the home property in capital markets (shares and mutual funds). However, if such funding just isn’t made in a brand new residential home located in India, specified bonds or fairness shares of an eligible startup, you will not be eligible for claiming the LTCG as exempt from tax.
In case of LTCL, it may solely be set off in opposition to LTCG. Accordingly, in the event you incur LTCL on the sale of this residential home, you can be eligible to set off such LTCL in opposition to some other LTCG throughout the yr.
You can even carry ahead any unadjusted LTCL for eight monetary years instantly succeeding the present monetary yr and set off the identical in opposition to future LTCG.
It must be famous that to allow you to hold ahead the LTCL, you can be mandatorily required to file your earnings tax return (ITR) inside the prescribed tax submitting due date.
Parizad Sirwalla is associate and head, world mobility providers, tax, KPMG in India.
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