FAQ :: Tax Related Matters

Income Tax relating to Transfer of Immovable Property

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Is it necessary to obtain any permission, from the Income Tax authorities if I want to purchase any immovable property ? Does the Indian Income Tax Act offers any special incentive for purchase of residential property by obtaining finance either from banks or other financial institutions ?
Whether the benefits attached to a residential property are also available to a commercial property ? What are the formalities specified under the Indian Income Tax Law, if any, that one has to complete before or after selling any house property, commercial or residential ?
What are the tax implications of sale of any house property, commercial or residential ? Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductable from profit arising on sale ?
Is there any way by which I can claim exemption from tax on capital gain ?  


Is it necessary to obtain any permission, from the Income Tax authorities if I want to purchase any immovable property ?

There is restriction on transfer of immovable property under Section 269UC of the Income Tax act.



Does the Indian Income Tax Act offers any special incentive for purchase of residential property by obtaining finance either from banks or other financial institutions ?

Under Section 88 of the income tax you can claim benefit for the principle repayment, interest on loan is deductible u/s 24 from income from House Property.



Whether the benefits attached to a residential property are also available to a commercial property ?

No such benefits are not available for commercial Properties.



What are the formalities specified under the Indian Income Tax Law, if any, that one has to complete before or after selling any house property, commercial or residential ?

You have to obtain Permission u/s 230A of the Income Tax Act if the value of the property to be sold is more than 5 lakh.



What are the tax implications of sale of any house property, commercial or residential ?

You are liable to pay Tax on profit arising from sale of a house property under the head Capital Gain.



Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductable from profit arising on sale ?

These expenses are allowable expenses from the full value of consideration of the sale of house property.



Is there any way by which I can claim exemption from tax on capital gain ?

The Income Tax act has made provision u/s 54 & 54A--G of the act whereby you can claim exemption from tax on capital gains.
Sec. 54: Purchase or construct another residential house worth the amount of capital gains. Sec. 54 protects capital gains arising out of sale (or transfer) of a residential house whether self-occupied or not, provided the assessee has purchased within 1 year before or 2 years after the date of sale of the original asset or has constructed within 3 years after that date, a residential house. The only condition is that the newly-acquired property should not be sold within 3 years from the date of its purchase or construction. If this condition is not satisfied, the cost of the new asset is to be reduced by the amount of long-term capital gains exempted from tax on the original asset and the difference between its sale price and the reduced cost will be chargeable as short-term (yes, short-term!) capital gain earned during the year in which the new asset is sold. This condition is unfair. One of my readers, Capt. Shelar, had sold a house situated in a main city and purchased a more spacious house in the suburbs. After moving in he found that one of the neighbours is a goonda and another is running a brothel. He desired to shift in a hurry but alas! He found himself trapped.
Sec. 54EA & 54EB: Invest within 6 months the amount of capital gains in avenues covered by Sec. 54EB which locks in the funds for 7 years or invest the of sale proceeds in avenues covered by Sec. 54EA which locks in the funds for 3 years. Sometimes the same avenue also attracts tax rebate u/s 88. However, if the assessee has availed of the Sec. 54EA/EB exemption from capital gains by contributing a certain amount, the rebate u/s 88 will not be allowed on the same amount and vice versa