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tax benefit on sale of house


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Recently, the Income Appellate Tribunal, Delhi, said that if a taxpayer sells multiple properties to invest in a house, he can get the long-term capital gains benefit on all the house he sells. But what happens if an individual sells one house and invest in multiple properties?

The law states that to take the benefit of the long-term capital gains tax, the proceeds of the sale of a property has to be invested in a single house. But in certain cases, the income department can dispute what the taxpayer considers as one residential unit. The tax department, for example, can dispute if a taxpayer sells one house and construct a building or a bungalow on a plot with two or three floors that are occupied by family members.

For the taxpayer, it is one residential unit. An assessing officer, however, can take the view that different floors can mean that each floor is an independent house. In such disputable cases, the taxpayer needs to be cautious, warns tax experts. “In such cases, the tax department will delve into details to confirm whether it should be considered as a single or separate unit,” says Kuldip Kumar, partner and leader, Personal Tax, PwC India.

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First Published: Fri, October 23 2020. 19:03 IST