{"id":6272,"date":"2023-08-28T14:33:17","date_gmt":"2023-08-28T14:33:17","guid":{"rendered":"\/blog\/?p=6272"},"modified":"2024-06-07T15:11:00","modified_gmt":"2024-06-07T09:41:00","slug":"how-are-capital-gains-taxed-in-real-estate","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-home\/how-are-capital-gains-taxed-in-real-estate\/","title":{"rendered":"Capital Gains Tax on Property: Know What is &#038; How are they Taxed"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<p>If you are looking at houses or property as an investment, it\u2019s best to have at least a basic knowledge of taxation.<\/p>\n\n\n\n<p>When you sell your house or property, the chances are high that you would do it only if you make some profits. Isn\u2019t it? While there can be a financial crisis, generally, people sell property only when they profit from it.<\/p>\n\n\n\n<p>Profit on the sale of capital items is termed capital gains. It is one of the most sought after investment methods. The profit is calculated after considering the inflation and the indexed acquisition cost. And these capital gainsare taxed differently depending on the holding period of the property. Let\u2019s take a look at the capital gains tax on real estate.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Gains made on the sale of property in possession for less than 2 years are termed as short-term capital gain (STCG).<\/li>\n\n\n\n<li>Gains made on the sale of property in possession for more than 2 years are termed as long-term capital gain (LTCG).<\/li>\n<\/ul>\n\n\n\n<p style=\"color:#FF0000\"><strong>Additional Read:<\/strong> <a href=\"https:\/\/tata-blog.osian.dev\/blog\/home-loan\/how-to-calculate-capital-gains-on-property\/\">How to Calculate Capital Gains on Property<\/a><\/p>\n\n\n\n<p>Both STCG and LTCG capital gains tax on property are taxed differently. Here\u2019s how you can calculate STCG:<\/p>\n\n\n\n<p><strong>Step 1:<\/strong> Begin with a full value of consideration.<\/p>\n\n\n\n<p><strong>Step 2:<\/strong> Deduct the following costs:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost of acquisition<\/li>\n\n\n\n<li>Cost of improvement<\/li>\n\n\n\n<li>Expenditure incurred exclusively and wholly in connection with such transfer<\/li>\n<\/ul>\n\n\n\n<p>Therefore, Short term capital gain = Full value consideration- the cost of acquisition- the cost of improvement- expenses incurred exclusively for such transfer.<\/p>\n\n\n\n<p>Furthermore, short-term capital gains are added to the seller\u2019s total income from all sources and taxed according to their tax slab.<\/p>\n\n\n\n<p>Now, here\u2019s how you can calculate LTCG:<\/p>\n\n\n\n<p><strong>Step 1:<\/strong> Begin with the full value of consideration<\/p>\n\n\n\n<p><strong>Step 2: <\/strong>Deduct the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Indexed cost of improvement<\/li>\n\n\n\n<li>Expenditure incurred exclusively and wholly in connection with such transfer<\/li>\n\n\n\n<li>Indexed cost of acquisition<\/li>\n<\/ul>\n\n\n\n<p><strong>Step 3: <\/strong>From the result, deduct exemptions provided under sections- 54, 54EC, 54F, and 54B<\/p>\n\n\n\n<p>Moreover, in long-term capital gains, the seller has to pay 20% tax on gains after indexation.<\/p>\n\n\n\n<p style=\"color:#FF0000\"><strong>Additional Read: <\/strong><a href=\"https:\/\/tata-blog.osian.dev\/blog\/home-loan\/what-are-the-expected-changes-in-taxation-on-home-loan-in-2021\/\">What Are the Expected Changes in Taxation on Home Loan in 2021?<\/a><\/p>\n\n\n\n<p>Let\u2019s take an example to understand this.<\/p>\n\n\n\n<p>Suppose you borrowed a <a href=\"https:\/\/tata-blog.osian.dev\/home-loan.html\">home loan<\/a> to purchase a property for Rs. 25 lakhs, and now it is being sold for Rs. 50 lakhs.<\/p>\n\n\n\n<p>If the period of holding the property is less than 2 years and you are in the 30% tax bracket, your tax on the sale of this property will be 30% of (Rs. 50 lakhs \u2013 Rs. 25 lakhs), i.e., Rs. 7.5 lakhs.<\/p>\n\n\n\n<p>Now suppose the period of holding was 5 years. The property was bought in 2011-12 (index \u2013 785) and sold in 2016-17 (index \u2013 1125).<\/p>\n\n\n\n<p>So now, the indexed cost of property is (1125\/785) x Rs. 25 lakhs = Rs. 36 lakhs.<\/p>\n\n\n\n<p>The effective capital gains are Rs. 50 lakhs \u2013 Rs. 36 lakhs = Rs. 14 lakhs. This is taxed at 20%, i.e., 20% of Rs. 14 lakhs that is Rs. 2.8 lakhs.<\/p>\n\n\n\n<p>Hence, there\u2019s a considerable benefit of waiting more than 2 years to sell your property and reduce your tax outgo.<\/p>\n\n\n\n<p>Wondering how you can calculate capital gains in a few seconds? By using a capital gains tax on property calculator!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>In summation<\/strong> <\/h3>\n\n\n\n<p>Lastly, if you are looking for home finance to purchase your next abode, look no further. Tata Capital\u2019s attractive <a href=\"https:\/\/tata-blog.osian.dev\/home-loan\/rates-and-charges.html\">home loan interest rates<\/a> and flexible offerings help make your dream home a reality.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tata-blog.osian.dev\/home-loan.html\">Get Home Loan<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>If you are looking at house or property as an investment, then you should make sure that you have atleast the basic knowledge of taxation.<\/p>\n<p><a href=\"https:\/\/tata-blog.osian.dev\/blog\/home-loan\/how-are-capital-gains-taxed-in-real-estate\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":6276,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[25],"tags":[],"class_list":["post-6272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan-for-home"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How are Capital Gains Taxed on Property? - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"Know what is capital gains tax on property and how it can be calculated using Capital Gain Tax Calculator. Read on to get details on capital gains tax on real estate!\" \/>\n<meta name=\"robots\" content=\"noindex, nofollow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How are Capital Gains Taxed on Property? - Tata Capital Blog\" \/>\n<meta property=\"og:description\" content=\"Know what is capital gains tax on property and how it can be calculated using Capital Gain Tax Calculator. Read on to get details on capital gains tax on real estate!\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.tatacapital.com\/blog\/loan-for-home\/how-are-capital-gains-taxed-in-real-estate\/\" \/>\n<meta property=\"og:site_name\" content=\"TATA Capital Blog\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-28T14:33:17+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-06-07T09:41:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.tatacapital.com\/blog\/wp-content\/uploads\/2020\/01\/capital-gains-taxed-in-real-estate.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"770\" \/>\n\t<meta property=\"og:image:height\" content=\"348\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Tata Capital\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Tata Capital\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.tatacapital.com\/blog\/loan-for-home\/how-are-capital-gains-taxed-in-real-estate\/\",\"url\":\"https:\/\/www.tatacapital.com\/blog\/loan-for-home\/how-are-capital-gains-taxed-in-real-estate\/\",\"name\":\"How are Capital Gains Taxed on Property? - Tata Capital Blog\",\"isPartOf\":{\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#website\"},\"datePublished\":\"2023-08-28T14:33:17+00:00\",\"dateModified\":\"2024-06-07T09:41:00+00:00\",\"author\":{\"@id\":\"https:\/\/www.tatacapital.com\/blog\/#\/schema\/person\/5ccf99347b9365e2fa68bd32006d0b4a\"},\"description\":\"Know what is capital gains tax on property and how it can be calculated using Capital Gain Tax Calculator. 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