Sale of immovable property and Income Tax Act

Immovable property falls within the definition of capital asset in Section 2(14) of the Income Tax Act, 1961.

Sale of immovable property attracts capital gains tax

• Short term capital gain tax (when the immovable property is held for a period less than 36 months)
• Long term capital gain tax (where the immovable property is held for a period of 36 months or more)

Short term capital gain tax is more than Long term capital gain tax.  The tax is exempted in case of residential homes, if the transferred asset is held by an individual for more than 36 months, and if within 1 year before or 2 years after the date of transfer, another/new residential house is purchased or within a period of 3 years after the date of transfer a residential house is constructed. Where the value of the new house is more than the capital gain, then the exemption would be the whole of capital gain. Where, however, the value of the capital gain is less than the cost of the new residential house, the exemption is permissible to the extent of the value of the new residential house. In case the amount of capital gain is not utilized for the purchase or construction of the new asset, before the date of furnishing the return of income, the same shall be deposited in an account in any such bank or institution as may be specified in, and utilized in accordance with any scheme which the Central Government may frame.