Do you remember the last time you wanted to sell your house but had to pay long term capital gain tax (LTCG)? Well, there’s good news for you. With the Interim Budget of 2019, you can invest in two houses and save taxes from the fiscal year (FY 2020).
As some of you may be wondering, gain from any residential property within two years in considered short term capital gain (STGC) whereas gain after two years is considered (LTCG). If you are somebody who owns a two properties, only one is considered self-occupied for residential purposes. The other property is termed as let out and you have to pay a tax on their annual gains even though it is vacant and the taxpayer has made no actual gains. The budget also proposed that if you have two of your properties are self-occupied, you don’t have to pay tax on either.
You also need to keep it mind that this can be availed only one in a lifetime. So, you cannot benefit from LTCG again and invest it in two houses. Sadly, you cannot have the best of both worlds twice.
But this move will win the cheer of so many Indians. They could be a joint family who earned a decent again through long term capital gains and are now looking to split and live separately. There could also be instances where a father or mother would like to sell his/her big house and use it to buy two houses for the children. However, if the LTCG are more than Rs 2 crores, the person won’t be able to buy two houses to pay tax. The person would have to invest into one single entity to save LTCG tax.
In case you want other ways to save income tax, bonds could be the answer. Instead of investing in one more property, you could invest in specified bonds and save tax. Also, you could save tax by investing in some medium small enterprises. If that isn’t your cup of tea, you could deposit your money in a capital gains account scheme (CGAS).
A word of caution when it comes to bonds is that they cannot be used against a loan or as a security. They would be converted to cash and you would have to pay LTCG tax.
