Income Tax: How much tax will be charged on selling an old house, know how you can save money..

Every person goes through thousands of questions before buying or selling a house. People also have many questions in their minds regarding the money that comes from selling the house. Whether these will be taxed or not, how much will be taxed and if tax has to be levied then how to save it. We try to give you answers to these questions.

Know when capital gains tax will be imposed
If you are earning profit by selling a residential property then you will have to pay tax. According to Section 48 of the Income Tax Act, if a house is sold within 2 years of purchase, then income tax will have to be paid on the profit made on it. If you sell this house after keeping it with you for more than 2 years, then the profit is considered as Long Term Capital Gain (LTCG). On this, you will have to pay capital gains tax at the rate of 20 percent.

You will get a discount on buying a second house
According to Section 54 of the Income Tax Act, if you have bought a new residential property by selling your house, then you can get an exemption in long-term capital gains tax. This exemption will be available only to individual income taxpayers or Hindu Undivided Families (HUF). However, none of the properties sold and purchased should be commercial. After selling the old house, you will have to buy a new house within 2 years. If you are building a house then exemption is available for 3 years. This exemption of long-term capital gains tax can be availed only on property worth up to Rs 10 crore. If you buy two houses within 2 years, you can also avail exemption. However, your total long-term capital gain should not exceed Rs 2 crore.

Where else can you save money?
While adding the profit made from selling a house, you will subtract the sale price and registration charges from the purchase price of that property. If you have spent money on property development, you can also deduct that from the profit. Besides, expenses incurred on selling the house such as brokerage and legal fees etc. are also deducted from the profit.

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