Budget 2017 has sops for selling property but restrictions on buying

Holding period for long term capital gains tax brought down to two years from earlier three

Budget 2017 : Your tax liability would now be lower when you sell a house in the third year after purchase. You can now claim long term capital gains (LTCG), if you sell a house after holding it for two years from the date of completion. Earlier, one could claim LTCG only after a holding period of three years. The rate for LTCG tax usually works out to be lower compared to short term capital gains (STCG) tax.

LTCG is paid either at flat 10% or 20% after adjusting the property price for inflation. STCG is added to the income of the seller and taxed as per his income tax slab, which comes to 30% if the gains are Rs 10 lakh or more.

While announcing the move, Finance Minister Arun Jaitley said: “This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets."

“The government seems to have made the changes to revive the property market that has suffered due to demonetisation,” says Rahul Garg, partner and leader direct tax, PwC.

Preeti Khurana, a chartered accountant with ClearTax, says that it was a surprise move to see the government giving sops for selling a house for a shorter holding period.

While the government has given relief for selling of property, it has brought down a benefit provided on buying a second house. The government has restricted the interest deduction for second home that buyers get under Section 24. Read more