Arpita 30 July 2024

Selling house after redevelopment tax implications

After the new union budget how will tax be calculated on sale of flat after redevelopment.

My case is as follows

I purchased a flat of 800 sq ft in 2003 for 32 lacs

Then in 2023 my building went into redevelopment.

Now instead of 800 sq ft my new flat will be of 1000 sq ft

If i follow the new tax that is implemented after the union budget i will be paying a lot of tax

For understanding if i sell the house for 3 cr then as i can not take the benefit of indexation my total tax income will be 3cr less 32 lacs which is 2.68 cr

What can i do to factor in the new tax implications and save tax on house sale.

I do not intend to buy another house.

Can i do an agreement with the builder where he can show that the additional 200 sq ft given due to redevelopment has had a cost and my actual cost of the flat is 32 lacs + this x amount.

Please advice

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2 Replies

T. Kalaiselvan, Advocate (Advocate) 31 July 2024

You are asking for some suggestions to reduce the long term capital gains tax.

In my opinion you may better consult your auditor for better options if you are in doubt about the option you have suggested here and proceed as advised.

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 31 July 2024

The tax calculation on the sale of a flat after redevelopment has changed with the new union budget. Here's a summary: 1. _Capital Gains Tax_: Taxable as long-term capital gains (LTCG) if the holding period is more than 2 years. 2. _Exemption_: Exemption available under Section 54 (for residential property) or Section 54F (for other assets) if the gains are reinvested in a residential property within 2 years. 3. _Indexation benefit_: Indexation benefit available for calculating LTCG. 4. _Tax rates_: LTCG taxed at 20% (plus surcharge and cess). Changes after the new union budget: 1. _Redevelopment_: Taxation now applies to the sale of redeveloped properties. 2. _Deemed capital gains_: Deemed capital gains tax on the difference between the market value of the redeveloped property and the original purchase price. 3. _Exemption_: Exemption available only if the redeveloped property is held for more than 2 years. 4. _Indexation benefit_: Indexation benefit not available for redeveloped properties. 5. _Tax rates_: Taxed at applicable slab rates (up to 30%).