ITR submitting for FY 2021-22: How to calculate capital achieve tax on sale of property

ITR submitting for FY 2021-22: Due date for revenue tax return (ITR) submitting for the evaluation yr (AY) 2022-23 for monetary yr (FY) 2021-22 is simply 3 days away. So, incomes people are busy calculating their annual revenue from each direct and oblique sources of their revenue. For an incomes particular person, many of the earnings are straightforward to calculate but when the taxpayer has offered any property, then in that case the state of affairs would possibly change into tough whereas calculating one’s capital achieve. So, you will need to know the way one can calculate one’s capital achieve on the property offered throughout FY 2021-22.

On calculate capital achieve on property sale, Hemal Mehta, Partner at Deloitte India stated, “Property i.e., land and building qualify as a ‘capital asset’ (excluding agricultural land which is not a capital asset), capital gains tax is levied at the time of transfer of such land and building. The nature of such capital gains can be classified as ‘long-term’ if the property is held by the seller for 24 months or more; or as ‘short term’ if held for less than 24 months. Long-term capital gains are taxed at the rate of 20 per cent (increased by the applicable surcharge and cess) whereas short-term capital gains is taxed at the normal tax rate of the assessees.”

Hemal Mehta went on so as to add that capital features is labored out by lowering the switch bills and the listed value of acquisition (‘CoA’) from the complete worth of consideration (‘FVOC’). However, in case of land/constructing; such FVOC needs to be minimal stamp obligation worth (‘SDV’) of such property, nevertheless, secure harbor restrict as much as 10 per cent is allowed. In different phrases, if SDV is greater than 110% of the sale consideration, then such SDV shall be deemed to be FVOC. Capital features taxpayers are additionally allowed an indexation of value incurred on buying and bettering the asset.

Further, the purchaser of the property has to deduct tax on behalf of the vendor, on the price of 1 per cent of the overall consideration, supplied the consideration exceeds ₹50 lakhs. Accordingly, if the funds are made in instalments; then TDS would even be deducted on each instalment. Thus, the customer is obliged to undertake the withholding tax associated compliances. The vendor can avail the credit score of such TDS on the time of submitting its income-tax returns.

Archit Gupta, Founder & CEO at Clear stated, “If the taxpayer has sold a property within two years of its purchase or construction, short-term capital gain(STCG) will be taxed at applicable slab rates. However, say the property was sold after completion of 24 months, long-term capital gain (LTCG) will be taxed at 20 per cent. LTCG.”

On compute capital features on property sale, Clear knowledgeable listed out the next method:

– STCG = Final sale value – (value of acquisition + value incurred for enchancment or alteration or renovation + value for making the sale).

– LTCG = Final sale value – (listed value of acquisition + listed value incurred for enchancment or alteration or renovation+ value for making the sale).

“However, these capital gains will be tax-exempt if the sale proceeds are invested in purchasing another residential property or in notified bonds of NHAI, REC, IRFC or in a capital gains account designated for such investments,” Archit Gupta of Clear stated.

Here indexation value shall be: Cost [Cost inflation index (CII) of year of sale CII of year of acquisition or 2001-02, whichever is later].

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