I purchased a home in 2012 and bought it at a loss in 2021. The circle charge was larger than my promoting worth. Can I declare long-term capital loss (LTCL) from the sale of the property and set it off towards long-term capital positive factors (LTCG) in shares or different monetary investments? How will the upper circle charge have an effect on my losses? Can I set off the losses from the above sale towards the sale of one other property wherein I’m prone to have LTCG tax? Can I make investments the proceeds from the home sale in capital markets, as I would not have any long-term or short-term capital positive factors? What are the tax implications of promoting a home property at a loss?
We perceive that the property you bought was a residential home. As you held the property for greater than 24 months, the asset shall be thought-about as a long-term capital asset and losses arising from its sale can be taxable as long-term capital loss (LTCL) in your palms.
The LTCL from the sale of such a residential home might be computed because the distinction between internet sale proceeds (sale proceeds much less brokerage bills) and the listed value of acquisition and enchancment. The listed value of acquisition of the asset in your case can be calculated as value of acquisition / value inflation index (CII) of yr of acquisition * CII of yr of sale. (CII prescribed for FY2012-13 and FY2021-22 are 200 and 317, respectively).
Please notice if the precise sale consideration is decrease than the stamp obligation worth by greater than 10%, for the aim of above calculations, the stamp obligation worth can be considered the deemed sale consideration.
Accordingly, in your case, if the precise sale consideration is decrease than the stamp obligation worth by greater than 10%, then the stamp obligation worth shall be deemed to be the sale consideration for the aim of the above-mentioned computation of LTCL.
If the calculation ends in LTCG, the identical can be taxable in your palms at 20% (plus relevant surcharge and cess) on the ensuing LTCG (internet quantity set off from any previous or present yr eligible losses).
There is no such thing as a restriction beneath the revenue tax legal guidelines on investing the sale proceeds of the home property in capital markets (shares and mutual funds). Nonetheless, if such funding will not be made in a brand new residential home located in India, specified bonds or fairness shares of an eligible startup, you might not be eligible for claiming the LTCG as exempt from tax.
In case of LTCL, it could actually solely be set off towards LTCG. Accordingly, in the event you incur LTCL on the sale of this residential home, you can be eligible to set off such LTCL towards every other LTCG throughout the yr.
You may as well carry ahead any unadjusted LTCL for eight monetary years instantly succeeding the present monetary yr and set off the identical towards future LTCG.
It needs to be famous that to allow you to hold ahead the LTCL, you can be mandatorily required to file your revenue tax return (ITR) throughout the prescribed tax submitting due date.
Parizad Sirwalla is associate and head, world mobility companies, tax, KPMG in India.
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