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Income tax implication of selling a house taken with home loan


I bought a 2-bedroom flat in Mumbai in December, 2018 via house mortgage from HDFC. Since then I’m availing tax rebate on compensation of mortgage and curiosity. Now I wish to promote this flat to buy one other three mattress room flat. Will I’ve to return the tax advantages availed from December, 2018 until date if I promote this flat? What are the opposite tax implications of the proposed transaction?

As per Part 80 C of the Revenue Tax Act, in case you promote a home, bought with house mortgage, inside 5 years from the top of the yr wherein it was so bought, all the advantages in respect of compensation of such house mortgage availed below Part 80 C shall develop into taxable within the yr wherein you promote such flat. So in your case any quantity of principal compensation claimed below Part 80 C shall develop into taxable through the yr of sale. Please observe that there isn’t any related provision for levying earnings tax in respect of tax advantages claimed for curiosity on house mortgage. So any tax profit claimed by you below Part 24(b) in respect of curiosity shall not develop into taxable now.

Since you might be promoting the home after finishing 24 months, earnings if any made on this shall be handled as long run capital features. As per Part 54 of Revenue Tax Act long run capital features on sale of a residential home are exempt if the capital features are invested in shopping for one other residential home inside specified time. In case your funding in new home is the same as or greater than such listed long run capital features, your whole long run capital features will likely be tax free. Please observe that the funding for buying new home will be made inside a interval of three years from the date of sale of the flat. Nonetheless, in case you aren’t capable of make the most of full quantity of capital features earlier than the due date of submitting of your earnings tax return, you need to deposit the capital features to the lengthen not so utilized in an account below “Capital Good points Account Scheme” with a financial institution.

Balwant Jain is a tax and funding knowledgeable and will be reached on jainbalwant@gmail and @jainbalwant on Twitter.com.

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