How To Save Money On Property Taxes

How To Save Money On Property Taxes – Just as you pay tax on the income you earn, the sale of your fixed assets also requires tax. Gains from the disposal of capital assets such as houses, shares and gold are subject to capital gains tax and there are certain benefits you can take to save on capital gains tax. Although there is little relief in paying short term capital gains (STCG) tax, there are provisions to save long term capital gains (LTCG) tax. We have highlighted three such provisions that will help taxpayers save tax.

Real estate, be it land or a house, is a fixed asset. Capital gains tax is added to the income from the transfer of such assets. If you sell the house within 24 months, you will have to pay STCG from income tax as per your income tax slab. After 24 months, you have to pay LTCG tax which is 20% of indexation benefits. Section 54 gives you relief when you sell a property and buy another. “Exemption under section 54 is available where the capital gain from the sale of the property is reinvested in the purchase or construction of a maximum of two houses. Before Budget 2019, the exemption was limited to only one property,” said Balwant Jain, a tax and investment expert. After the Budget, it was extended to two houses. However, the capital gain on sale of house property should not exceed ₹2. crore to claim exemption on reinvestment of two properties. This benefit can be apply only once in a lifetime.

How To Save Money On Property Taxes

How To Save Money On Property Taxes

To claim exemption on the entire LTCG amount, you need to reinvest the entire amount. “If the entire LTCG amount is not reinvested, a proportionate exemption is available,” said Ashok Shah, partner at chartered accountancy firm NA Shah Associates LLP. Remember that your exemption will be canceled if you sell this new property within three years. income from the purchase and sale of new real estate is taxed as short-term capital gains. New properties must be purchased either one year before the sale or two years after the sale of the property. Or new housing must be built within three years from the sale of the property. If you cannot use capital gains to buy or build new houses before the date of income tax, you must deposit the amount in capital gains. chart of accounts (CGAS) Otherwise, the income becomes taxable. Even if you have taken a home loan to buy a new property, the capital gains exemption under § 54 applies and also if you used it to repay the home loan.

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This is a section that you can use if you want to save LTCG on sale of property and are not interested in reinvesting the proceeds into property. “Section 54EC allows exemption from LTCG on sale of land and buildings if the capital gain amount is invested in certain specified bonds. The exemption is available for both residential and non-residential properties,” said Shah. The bonds defined here mean 54EC bonds issued by the National Highway Authority of India, Rural Electrification Corporation and the like. You have six months to invest in these bonds. “The maximum amount allowed is 50,000 ₹000 and now the lock-in is five years instead of three years. The course is not attractive; if possible you can buy real estate instead of bonds,” said Mrin Agarwal, Financial Educator, Founder Director of Finsafe India Pvt. Ltd and Co-Founder of Womantra. These bonds carry an interest rate of 5.75% and are taxable. After Budget 2018, Section 54 EC is limited to gains from real estate only .

But what if you have capital gains from assets like gold, stocks or even mutual funds? Even LTCG on assets other than residential property can be saved under section 54F if you choose to use the proceeds to purchase residential property under certain conditions. “Unlike Articles 54 and 54 EC, to claim this exemption, you need to invest the entire sale consideration, not just the capital gain, to buy or construct a new residential property,” Jain said. In case you are unable to invest the entire amount, exemption is allowed on a pro rata basis. Let’s say you are carrying ₹20 lakh worth of gold that you bought five years ago for ₹10 lakh. To avoid LTCG tax on ₹10 lakh (₹20 lakh minus ₹10 lakh) you need to reinvest the entire ₹20 lakh. If you invest only 50% of the sales proceeds, then only 50% of the LTCG amount i.e. ₹5 lakh will be tax free and the remaining ₹5 lakh will be taxable.

Also, to avail the benefit, “one should not own more than one house on the date of transfer other than the one purchased for claiming exemption under this section,” Jain said. As in section 54, a new property or one must be purchased. one year before or within two years after the date of transfer or the new property must be constructed within three years from the date of transfer. Remember that the exemption can be withdrawn if this new property is sold within three years of its purchase.

Can more than one section be used to pay less tax? Shah said deduction can be claimed under both Article 54 EC and 54 EC by adding investment in new property and specified bonds. On availing simultaneous exemption under Sections 54 and 54F by investing in the same house, Jain said, “If all the conditions are fulfilled, the assessee can claim exemption under Sections 54 and 54F for investing in the same house.”

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So calculate LTCG based on various fixed assets and avail tax benefits. Do not ignore the rules related to reinvestment time, lock-in period and other provisions specified in reinvestment.

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How To Save Money On Property Taxes

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Property tax (sometimes called land tax rate or land tax) is a tax imposed on real estate.

Depending on the value or size of the property, property owners must pay a certain annual tax to the local authority or municipality.

While the concept of an estate tax may make sense, there are also many questions surrounding this tax scheme.

Many governments around the world are in urgent need of money to fund their operations, pay politicians and support the entire system.

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Therefore, property taxes can have a significant positive impact on public finances, especially in areas where the land tax is quite high and where the value of houses or apartments is quite high.

Many also consider it fair that people who are able to buy real estate give a certain amount of money back to society.

In many cases, people can only afford a house if they are quite wealthy or have a good income.

How To Save Money On Property Taxes

However, many people do not have that kind of wealth, and therefore people who have a lot of money should pay some of that money back to our society to fund many important projects.

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In many countries around the world, the gap between the rich and the poor is huge, and while a small elite often owns most of the country’s total wealth, the general public often does not share in the bounty at all.

So in order to redistribute money to poor people who desperately need it to survive, property taxes can be a very good way to do it, because people who have wealth have to pay taxes, while poor people who don’t have property have to pay taxes. property does not own property. you don’t have to pay anything.

In turn, social tensions can be reduced as the poor feel that the level of fairness is increased and their frustration can be reduced.

Let’s be honest. No one really likes to pay taxes, but the government often needs money to afford important projects that benefit the public.

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So to finance these projects, property taxes can be a great way to do that because property owners can often pay these taxes because they often have a lot more wealth than the average person.

Consequently, to collect taxes from those least affected by it, property taxes may make more sense than other taxes, such as VAT, which also affect the poorest among us.

Property taxes also have the advantage of giving governments the ability to raise additional funds for a variety of important public infrastructure projects.

How To Save Money On Property Taxes

For example, from time to time you need to maintain roads or improve public transport.

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All of these things can be expensive and result in additional tax revenue from property taxes

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