Know how you can save the tax on profits on selling property.
Whenever you sell land or property and a large amount comes to your bank account, the biggest question is whether this money will have to pay income tax? Especially when profits are in millions, it becomes necessary to understand the ways of saving tax.
If you are also planning to sell property or want to know about it, then let us understand when you have to pay tax on selling land and which rules are applicable to it. Apart from this, it is also known how you can save the tax on selling property…
Why is it necessary to pay tax on selling land?
When you sell a property, the profits from it are considered to be a capital gains under the Income Tax Act. The land also falls in this category, but, whether you have to pay tax or not, it is decided by the location of the land and how it has been used.
Easy ways to save tax
If you have sold urban agricultural land and purchased new agricultural land within 2 years from that profit, then you can get exemption from the entire capital gains tax under section 54B. On the other hand, even if you have not purchased new land, you can also deposit the profit amount in Capital Gains Deposit Account Scheme, this gives you relief in tax. Provided you buy land later. These methods and correct planning can reduce the tax incurred in case of profit from property sales or can also be completely saved.
When and how to pay tax?
If you kept the land for more than 24 months and then sold, then the profit will be considered as long term capital gains. About 20% tax has to be paid on this, but due to indexation you can reduce the tax amount. If you sell the land in less than 24 months, then the profit will be added to your normal income and tax will be levied according to your income tax slab.
If you are also going to buy or sell property, then take special care of some things. For example, the location of the land correctly find out whether the land is urban or rural. Along with this, correct the purchase price, time and profit of the land before selling. Explain that tax rules can be changed, so check the annual update.
Difference between urban and rural land
If your land is 2 km from the border of the municipal or municipal corporation and the population is less than 10,000 and the land is being used for cultivation in the use of land, then it is considered to be rural agricultural land. You will not be taxed on selling such land. On the other hand, if the land falls within the city limits, whether it is agricultural land or any other property, the profit on it will have to be paid.