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How to Calculate Tax on Capital Gains From Selling a Housing Property?

Steps to Calculate Capital Gains from Selling a House Property

The calculations pertaining to the example is shown in the following table:

Particulars

Value

House's selling price

₹65 lakhs

Deduct – Cost of commission, brokerage, etc.

₹70 thousand

Net consideration

₹64.3 lakhs

Deduct – Cost for improving the house

₹1.3 lakhs

Deduct – Cost of acquisition of the house

₹50 lakhs

STCG or Short-term capital gain

₹13 lakhs

As per the tax slab, this short-term capital gain will be taxed 30% according to the income tax rate slab. This amounts to ₹3.9 lakhs.

The calculation of long-term capital gain is represented through a table:

Particulars

Value

Total sale Consideration

₹95 Lakhs

Deduct- Cost of commission, brokerage etc.

₹1 lakhs

Net consideration

₹94 lakhs

Deduct – Indexed house improvement expenses

₹7.6 lakhs

Deduct – Indexed cost of acquisition

₹68. 4 lakhs

Total long-term capital gain

₹18 lakhs

Tax exemption on capital gain applicable under sections - 54G, 54B, 54, 54D, 54ED, 54F, 54EC, (if any)

NA

Net LTCG or long-term capital gain

₹18 lakhs

₹18 lakhs will be taxed according to the tax rate slab, which may equal 20%. The tax on long-term capital gains after selling the housing property amounts to ₹3.6 lakhs

Tax Rate on the Income Gained from Sale of Assets

Take a look at this table illustrated below summarising the tax rate imposed on the income arising from selling of different types of capital assets:

Type of Asset

Duration of Assets

Applicable Tax Rates (as of April 2023)

Immovable property (for example, house)

Long-term – More than 2 years Short-term – Less than 2 years

Long-term - 20.8% Short-term – taxed according to the income tax rate slab

Listed shares (valid on shares sold through Indian stock exchanges on which investors pay the security transaction tax)

Long-term – More than 1 year Short-term – Less than 1 year

Long-term - The long-term capital gains up to ₹1 lakh is non-taxable. Amount exceeding this is taxed at 10% without indexation. Short-term – 15.60%

Movable property

Long-term – More than 3 years Short-term – Less than 3 years

Long-term – 20.8% with indexation Short-term – taxed according to the income tax rate slab.

Equity-based mutual funds

Long-term – More than 1 year Short-term – Less than 1 year

Long-term - The long-term capital gains up to ₹1 lakh is non-taxable. Amount exceeding this is taxed at 10% without indexation. Short-term – 15.60%

Debt-based mutual funds

Short-term, irrespective of the holding period

Taxed according to the individual income tax slab only

Moreover, note that the tax rates mentioned above exclude the surcharge of 10% applicable on earnings between ₹50 lakh to ₹1 crore. If the income exceeds ₹1 crore, the surcharge is 15%. 

You can claim tax exemption on capital gain from the profit made from selling a residential housing property under section 54 of the ITA. Individuals and HUFs qualify to claim this tax exemption only once on long-term capital gains when they use the profit to purchase another house. You can buy a property within 2 years of selling an old property. Alternatively, you can construct a new house within 3 years of selling an old property. However, capital gains from selling the housing property and acquiring the new 2 house property is available only once in life time and with the condition that capital gain is not more than ₹2 crores. 

Moreover, you can also invest your profits earned by selling a capital asset in the Capital Gains Account Scheme to enjoy tax exemption. These are a few ways to enjoy exemption on capital gain. 

Thus, keep the pointers mentioned above in mind while calculating tax on capital gains obtained after selling a property. 

Besides knowing how to calculate tax on capital gains after selling housing property, and reinvesting that income to the right financial avenues can relieve you from tax liability.

Frequently Asked Questions