A query was raised regarding ltcg on sale of property and was asked that whether
there was any way to avoid paying ltcg on sale of property without investing in another property. The answer is appended below:
there was any way to avoid paying ltcg on sale of property without investing in another property. The answer is appended below:
Please don't be focused simply on not paying the tax. Do the calculations carefully.
If you're not buying a property, you have two options left:
1. Pay the tax @20% on LTCG after indexation
2. Take 54EC bonds for 5 years. Max 50L. Interest at 5.25% per annum, taxable.
Now calculate.
If you pay tax and invest rest of the amount as per your risk profile and future requirements, what returns are you likely to get and what will be the amount like after 5 years?
If you buy 54EC bonds and get 5.25% interest (effectively 3.68% after tax if in 30% tax bracket), what do you have at the end of 5 years.
Choose the option that is best mathematically.
Sometimes the paying tax option comes out better.
Only residential property can be purchased. Two property can be purchased if ltcg is less than 2cr. One if above. Either ready house or build house on residential land.
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