If you keep a property with you for two years and then sell it, then you have to pay Long Term Capital Gains Tax on the profit made from this sale. The rate of this tax is 20 percent.
If you have just sold a property and want to save Long Term Capital Gains Tax on the gains made, then you should invest in bonds issued by a Public Sector Undertaking (PSU). Investing in these bonds will not only save you LTCGT but will also give you good returns.
If you keep a property with you for 2 years and then sell it, then you have to pay tax (LTCGT) on the profit made from this sale. The tax rate is 20 percent. However, to save LTCGT, it is necessary to invest in these bonds within six months of the sale of the asset.
This is the advantage
You can save long term capital gains tax by investing in bonds issued by public sector undertakings like Rural Electrification Corporation (REC) on the profit earned from the sale of property. Under Section 54EC of the Income Tax Act, a provision has been made for exemption from Long Term Capital Gains Tax (LTCGT) on such investments. From April 1, 2022, REC has started issuing new bonds.
The investment made in these bonds is completely safe, as these bonds are backed by the government. The amount received after completion of these bonds is tax free and a tax payer does not need to invest it elsewhere to save tax.
Calculate this
way: Suppose a property that you bought three years ago for Rs 35 lakh, you sold it for Rs 60 lakh by keeping it with you for three years. In this way, you got capital gains of Rs 25 lakh from him. You can keep these 25 lakh rupees with you for 6 months and you will not have to pay long term capital gains tax on it.
Within six months, you will either have to buy another property or you will have to pay capital gains tax at the rate of 20 per cent. If you do not want to buy property with this amount, then you can buy rural electrification corporation bonds from it.
You will get triple benefit of this. One, you will not have to pay long term capital gains tax at the rate of 20 per cent. Second, you will get interest at the rate of 5% per annum. Third, there will be no risk of sinking your investment due to the government guarantee. A person can invest Rs 50 lakh in these bonds in a financial year.
