Tax implications of buying or selling a house on loan
Tax Implications Of Buying Or Selling A House On LoanApartments and villas in Cochin and Trivandrum are in high demand asinvestments and many buyers sell their properties to cash in on theirinvestment. There are many flats and villas in Cochin and Trivandrum that haveloans on them. Here are a few tips on the tax implications of selling suchproperties that you must consider before making the final deal.While deciding to buy or sell a flat or house on loan, you would have alreadymade all other arrangements for a smooth transition. Studying the documentsand keeping them in order, obtaining no-objection certificates and ensuringsale deeds are in order are all a part of buying or selling a flat or house. Closingthe home loan or taking out a new one in the name of the new owner hasmany implications, eligibility criteria being one of them.While selling a home, the tax implications have to be taken into account. Eventhough selling or buying a mortgaged property is possible, selling it within afew years of buying it can bring down your profits by half. The seller will incurshort term capital gains tax regardless of whether the sale proceeds are beingreinvested in property or not.While calculating your gains, you have to take into account the interest youhave paid on your home loan till date. The Income Tax Act, under section 80Callows you to claim the principal amount of your home loan as tax deduction.But if the property is sold within five years of buying, the tax deduction isreversed.If you have held the property for more than three years, the gains are treatedas long term capital gains and taxes are at a lower rate. There is also the optionof using indexation o bring down the tax liability. This lowers the effectiveprofit from the sale of the asset and therefore, the tax liability. The investorhas two options either to pay a flat 10% tax on the capital gain or 20% afterindexation.While looking for flats in Trivandrum or Cochin, you may find many suchmortgaged properties available. There are builders who also have the resellingoption and who offer such service to their existing clients. Apartments inCochin and Trivandrum are in high demand in the real estate market and aregood as investments. However, if you finally deciding on a mortgaged flat orvilla, take into account the tax implications before making your final move.