I am paying EMI for a Rs 30 lakh home loan. Will I be liable to pay tax after selling the flat?

 Welcome to the Reader’s Query segment of FE Money. Last week, Debopriyo Bhattacharyya asked us whether he would be liable to pay any taxes on the balance amount he may get after selling his flat and closing the home loan.

Debopriyo had purchased a flat worth Rs 38 lakh in 2017 for which he had taken a home loan of Rs 30 lakh. He has been regularly paying the monthly EMI since 2017 and also claiming tax deductions applicable on the home loan interest and principal.

Gaurav Mohta, Chief Marketing Officer at HomeFirst Finance and Sujit Bangar, Founder at Taxbuddy.com have answered Debopriyo’s query.

Gaurav Mohta says:

When you sell a property, you are liable to pay capital gains tax on the indexed profit (Long Term Gains [LTCG] tax @20% in your case, as the holding period is greater than 24 months). For indexed profit calculation, you would need to adjust for inflation using the Cost Inflation Index (CII).

You can also include the cost of improvement/transfer incurred by you in this calculation. This is over and above the regular income tax payable on the income earned through salary or your business profit. But, if you plan on re-investing the capital gains amount to buy a residential property within a specific time period, you may end up paying a lower or zero Capital Gains tax.

Sujit Bangar says:

You have purchased a flat on a home loan and you may be availing deduction for principal repayment and interest payment. If you sell the flat now and the sell consideration is more than the cost of acquisition, you will earn a capital gain. If you sell your property in 2023, the resultant capital gain would be long-term capital gain. This long-term capital gain would be liable for taxation. If you are using sell consideration for repayment of existing loan, you won’t get any tax incentive.

Source Link: https://www.financialexpress.com/money/i-am-paying-emi-for-a-rs-30-lakh-home-loan-will-i-have-to-pay-tax-if-i-sell-the-flat-3233542/

Website Link: https://www.taxbuddy.com/


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