An assess is eligible to claim upto a maximum amount of Rs.1.50 Lakhs under this section towards principal repayment and Stamp duty & Registration charges paid on purchase of property.
- Interest claim – if Self-occupied House Deduction upto Rs.2 lakhs towards interest payment on the loan taken for the purposes of purchase of Residential house. If let-out then the total interest payout can be claimed as deduction.
- Standard Deduction – 30% standard deduction on the rental income received if the property is let-out.
- Property tax paid – Expenses can be claimed as deduction from the rental income.
- Purchase of Property from sale proceeds of Sold property – The asset sold by the assessee should be a long-term capital asset (held for more than 3 years), being a residential house property or any other long term capital asset. Within a period of 1 year before or 2 years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of 3 years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional). The new house acquired will have a lock-in period of three years.
- Sale of the property – When he sells the property, pay tax on the profits made. If sold within three years from the date of Registration, he needs to pay short-term capital gains tax (STCG). The profits are combined with other income and taxed on the I-T slab rate.
If the property is held for more than three years, it attracts long-term capital gains tax (LTCG). The tax is levied at 20 per cent (plus surcharge and cess) after adjusting the gains for inflation using the cost inflation index. The LTCG tax can be saved by investing in specified bonds issued by the National Highways Authority of India or Rural Electrification Corp (under section 54/54EC) within six months from the date of sale. These bonds have a lock-in period of three years. The maximum amount he can invest is Rs.50 lakh in these bonds, while tax have to be paid on the remaining amount.