I have a plot which can be sold at Rs.75L with which I am planning to buy a commercial apartment @ Rs.75L, which yields Rs.60000Rent per month, which I want to invest in another Real estate property, which yields Rs.20000rent, which I intend to purchase another apartment .What would be the tax treatment?
1 Answers
If you have hold the plot for more than three years, then long term capital gains will apply and income tax will be 20% on the capital gain after indexation.
In your case, in order to save income tax on plot sale, you can buy a new residential property for atleast 75 lakhs (1 year before transfer or 2 years after transfer) or get a residential house constructed within 3 years from the date of transfer. But the person can hold only one house property other than the new exempted asset at time of buying new exempted property.
- 2nd and 3rd both investments are residential: then you can claim exemption for any of these property, but you should not be holding any other residential property before these.
- In case only 3rd investment is residential, you can claim exemption for it but you should not be holding more than one residential property before this.
The ambiguity still remains. 1. I do not intend to hold on to any of these commercial/residential prperties. 2. I intend to live on rent for the next 20 years 3. As soon as the Plot is disposed, I intend to invest the same in the commercial property mentioned above.Hence no Long term capial gains. 4. The returns as RENT from this commercial asset shall continuously be used as EMI for the Residential property number 1. 5. The Rent recieved from this First residential property will be diverted as EMI for the Residential property number 2. 6. The rent recived on this second residential property is nominal, which I intend to show in my income. 7. Is it legal? 8.All the above three proerties are in a different city, while I stay on rent in another city.Hence I can claim exemption on both the properties. 9.But how the commercial porperty will be treated during the 20 year period and after 20 years? 10.What do you mean by "Transfer" and how do you define "Holding"? Do I hold the residential properties?As I am going for a bank loan, I believe I will not be in possession of them until the loan is cleared!
Please revert
- If you don't hold investment for more than three years, it will be short term gain and you will be taxed at maximum rate as per your slab.
- In order to save income tax on capital gains, new investment has to be done in residential property and not in commercial one.
- Nothing in illegal in these transactions and you may execute them but you will have to pay income tax on rental as well as capital gains income.
Transfer means registered transfer of property. Holding means for how much time you held the property. Even if property is on loan, you hold it and not the bank.
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