Capital Gains Tax (CGT) is a significant aspect of property transactions in India. When you sell a property and make a profit, you are liable to pay CGT on that gain. This tax is levied on the capital appreciation or profit earned from the sale of a capital asset, which includes property. Understanding CGT can help you plan your property transactions better and manage your tax liabilities effectively.
Types of capital gains on property
There are two types of capital gains: short-term capital gains (STCG) and long-term capital gains (LTCG).
- Short-term capital gains (STCG): If you sell a property within 3 years of acquiring it, the profit is considered as STCG. It is added to your regular income and taxed according to your income tax slab.
- Long-term capital gains (LTCG): If the property is held for more than 3 years before selling, the profit is categorised as LTCG. LTCG on property is taxed at a flat rate of 20% with indexation benefits.
Calculation of capital gains tax
Calculating CGT involves a specific formula:
Capital gain=Selling Price−(Purchase Price+Improvement Costs+Transfer Costs)Capital Gain=Selling Price−(Purchase Price+Improvement Costs+Transfer Costs)
Exemptions and deductions
To reduce your CGT liability, you can avail exemptions and deductions:
- Indexation benefit: Adjusts the purchase price for inflation, reducing the taxable LTCG.
- Investment in bonds: Investing the LTCG amount in specified bonds within 6 months of sale can exempt the tax.
- Capital gains account scheme: Depositing the LTCG in a capital gains Account before the due date of tax filing can defer the tax liability.
Tax implications on sale of land vs. other property
The tax implications differ for the sale of land and other types of property:
- Sale of land: Generally, land is considered a long-term capital asset if held for more than 3 years. LTCG is taxed at 20% with indexation benefits.
- Other property: Residential and commercial properties have similar tax implications as land, but the indexation benefits can vary based on the type and usage of the property.
Bajaj Finserv Loan Against Property
Considering the pivotal role of property valuation, influenced by CGT, in Loan Against Property transactions, leveraging this financial tool emerges as a strategic choice for both individuals and businesses. If you own a property and seek funds without selling or losing ownership, Bajaj Finserv Loan Against Property offers an ideal solution. This option allows you to access substantial funds while retaining ownership and uninterrupted usage of your property.
With a loan against property from Bajaj Finance, you can unlock the latent value of your property to meet various financial needs, be it business expansion, education funding, debt consolidation, or personal expenses. The loan amount is determined by the property's valuation, ensuring that you can access funds proportionate to your property's worth.
Moreover, Bajaj Finserv Loan Against Property offers competitive interest rates, long repayment tenures, easy eligibility criteria, and quick approval processes, making it a preferred choice for many borrowers. Explore the possibilities with loan against property and harness the potential of your property assets for a better financial future.
