How much is the TDS on Property Sale (2022)?
- Sep 16, 2022
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Capital Gains Tax on The Sale of Property
Capital gains tax must be paid on any profit from selling an investment property, such as a piece of real estate. In its most basic form, it is a tax on the increase in the value of a property. The amount of taxes you are required to pay on capital gains is variable and is determined by the amount of profit you made, your tax filing status, and the amount of time you owned the property before selling it.
Because the value of real estate transactions is typically rather high, the amount of money that must be handed over to the government in taxes is also quite considerable. As a result, the computation of the appropriate capital gains tax must be carried out with the utmost care.
In addition, there are several legitimate ways to lessen the impact of this capital gains tax through careful tax planning. This is possible since the government permits several tax exemptions on the sale of property.
TDS On Property Sale
TDS is applicable regardless of whether the capital gain was realized over a short or long period, so there is no distinction between the two. TDS is an abbreviation for “Tax Deducted At Source". It refers to a deduction that the buyer makes before the payment is given to the seller. The buyer then sends the seller the remaining payment amount after deducting the TDS.
TDS is not a new type of tax; rather, it is a type of tax that is paid in advance and has the potential to be adjusted with the total tax liability computed at the end of the year while submitting an income tax return.
The TDS rate differs depending on whether the seller is a non-resident Indian (NRI) or an Indian resident, as listed below:
- If the seller is a resident, a 1% TDS deduction will be made if the property’s value exceeds 50 lakhs.
- If the seller is a non-resident, a TDS of 20% would be applied to the transaction regardless of the property’s valuation. In addition to this 20%, a cessation charge and a surcharge would use.
Exemptions on Capital Gains Tax
The available exemptions on capital gains tax are:
It’s possible to get NHAI or REC bonds If you are:
An assessee When an immovable asset is sold, this is considered a long-term capital asset.
Stock in the National Highways Authority of India (NHAI) is purchased with the capital gain within six months after the transfer date. An acronym for the Rural Electrification Agency Investment or capital gain, whichever is less, is exempt.
Period of Commitment:
5 Years Bonds issued by NHAI and REC cannot have cumulative investments of more than 50,00,000 in the calendar year preceding the sale of a long-term capital asset and the fiscal year immediately following the sale.
AGRICULTURE LAND (SECTION 54B)
Land used for farming is sold, depending on whether it will be used for the long or short term. The assessee, parents, or HUF must have used the land for agricultural purposes for at least two years before the transfer date.
Investment of Capital Gain in the Acquisition of Agricultural Land within Two Years of the Date of Transfer. Invested money or capital gain, whichever is less, is exempt.
How To Decrease Property Capital Gains Tax?
You are eligible for tax exemptions on your long-term capital gains under Section 54 of the Income Tax Act of 1961. You must be an individual seller or a member of a Hindu Undivided Family to sell the property, and you must also satisfy the qualifications that are listed below:
- You have no choice but to invest capital gains in purchasing or constructing a new home.
- You are required to buy the new house one year before the sale of the old home or two years after the sale of the last place.
- You have a holding period of three years following the sale of the old house before you may begin construction on the new home.
- You only need to buy or build one house or property in addition to what you already have.
- You are required to make the purchase or development of the property inside the boundaries of India.
- You are not allowed to sell the new house for at least three years after you take possession of it.
Concerns Regarding Taxation For Non-Resident Indians Who Sell Property In India
- The amount of time you have owned an Indian property will determine the tax you must pay when you sell that property.
- If you sell a piece of real estate that you have owned for more than two years, you will be required to pay a long-term capital gain tax on the profit made from the sale of the property.
- If a piece of property is held for less than two years, the owner will be subject to the short-term capital gains tax.
- When determining the number of capital gains that can be made off of an inherited property, the date that the original owner paid for the property will be considered.
Yes, non-resident Indians are entitled to transfer their immovable property in India to a local Indian citizen. Any immovable property, except agricultural land and farmhouses, can be transferred from an NRI to a citizen of India living outside India or a PIO cardholder outside of India.
Whenever a non-resident Indian citizen (NRI) sells property in India, the acquiring buyer is obligated to make a TDS deduction of 20% in the event of long-term capital gains. However, if the property is sold in less than two years, a short-term capital gains tax of thirty percent will be deducted from the proceeds of the sale.
- Gains on the sale of property that have been held for longer than two years and qualify as long-term capital gains: 20%.
- Gains in capital attributable to the sale of an asset that has been owned for less than two years: By the seller’s chosen income tax brackets
Indexation refers to recalculating an asset’s purchase price after adjusting to an inflation index. It gives the taxpayer the potential to minimize the total net capital gain, reducing the amount of tax that must be paid. The Cost Inflation Index, abbreviated as CII, calculates the indexation. The central government determines the index, and once it is established, it does not change until the following year.