Capital Gains Tax on Property Sale

Property sale understandably counts as a major decision one makes since it encompasses a whole lot of financial facets. It’s crucial to be keyed into significant aspects of property sale so you strike the best deal and avoid the consequences of inaccurate steps. Whether it’s about buying/selling properties in Pune or anywhere else for that matter, paying capital gains tax on property sale is one such measure you can save yourself from.

If you sell your property, you are required to pay capital gains tax on the profit earned after taking due measures like considering the inflation and indexed cost of acquisition, etc. At the same time, you must adopt relevant strategies to save on the capital gain tax on sale of property legally. Here goes:

Invest in Bonds

If you have sold your property in recent times, it is advisable for you to invest in certain financial assets. It will help you save your capital gains since the long-term capital gains are exempted under Section 54EC of the Indian Income Tax Act, 1961. You need to invest the sum earned in bonds within six months of the transfer of the sum and realization of gains to avail of tax exemption on your capital gains. Further, the funds have to be invested in these bonds for at least three years as a lock-in period.

Capital Gains Tax on Property Sale

If the funds are parked in these bonds for a period exceeding the lock-in period of three years, there would be no interest on them, and the redemption of these capital gains bonds will turn automated. Also, you are not allowed to assign these bonds to any other party nor contract or trade them.


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Invest in CGAS (Capital Gains Account Scheme)

CGAS as an investment solution is ideal for those who cannot invest in a new property before their income tax return filing. A person can invest in this scheme for three years and is entitled to use the capital gains to purchase or build a residential house. You have to make a deposit in this CGAS account before filling or registering your income tax return, and ensure this investment in the Capital Gain Account Scheme (CGAS) is specified in the income tax return.

Capital Gains Tax on Property Sale

The CGAS account can be opened with selected banks (cooperative banks and regional banks are not in its ambit). Also, you can deposit money in this account either through monthly instalments or lump sum, which will help you save taxes on capital gains.

Set Off all Your Capital Losses

An effective way to save on capital gains tax is to set off all your capital gain losses. Doing so facilitates setting off all capital gains or profits against the capital losses you sustained earlier. It is similar to the same year adjustment of capital loss and capital gains. Nevertheless, do ensure that the capital loss is from the former date, and know that short-term capital loss can only be set off against short term capital gains.


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Likewise, long-term capital losses can be only set off against the long-term capital gains along with the specification to carry forward all the capital losses for eight subsequent years. Further, you need to file the income tax return before the closing date of your income tax return filing to carry forward all your capital loss.

Capital Gains Tax on Property Sale

Further, note that under Section 54 of the Income Tax Act, 1961, long-term capital gains are exempted from taxation for individuals and Hindu Undivided Families on the sale of a house property if:

  • The capital gains are utilized to purchase or construct another residential property.
  • A new home is built within three years after the sale of the old home.
  • A new house is bought one year before or two years after the old house is sold.
  • Only one additional property is bought or constructed.
  • The new property is located within India’s national borders.
  • The new house is not traded for three years after acquiring possession.
  • If the cost of the new property is lesser than the sale amount, the exemption will be applicable proportionately (remaining amount ought to be invested under Section 54EC within six months).

Pune, as always, is offering ample scope for best property deals. In case you are on the threshold of going ahead with a property deal, please adopt these smart strategies and due procedures to strike a rewarding deal.

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