If I sell my 18-yr-old house for Rs 1 cr and purchase another house for Rs 1 cr, do I still have to pay capital gain tax?

Profits on sale of any capital asset are taxed as capital gains. All immovable assets including a residential house, which are not used in your own business, are treated as capital assets. The rate of tax on capital gains depend on the type of asset and period for which the asset was held by the taxpayer, Balwant Jain, a tax expert, said.

Profits on sale of a residential house are treated as long term capital gains if the house is sold after two years and short term capital gains if sold within two years, he added. In case the profits are treated as short term capital gains, the same are included in your other income and taxed at the slab rate applicable. The long term capital gains are taxed at 12.50 percent. In case land and building acquired before July 23, 2024, is being sold by a resident individual or HUF, the taxpayer has option to pay lower of tax at 20 percent on indexed profits or 12.50 percent on actual difference between sale price and cost of acquisition.

Under Section 54, an individual and an HUF can claim exemption from tax on long term capital gains if the taxpayer purchases another residential house within two years or construct a new house within three years from the date of sale of the original residential house. The capital gains exemption can also be claimed if a residential house is bought within one year prior to the date of sale of the original residential house.  So if you are selling a residential house, you have to only invest the capital gains and not even the net sale proceeds. However, if you are selling a commercial house property, you have to invest the net sale consideration for claiming exemption under Section 54F.

Please note the money which is not utilised by the due date of filing the ITR for buying or constructing a residential house is required to be deposited in capital gains account to be opened with scheduled bank by the due date of filing your ITR. The due date for filing of the ITR would vary depending on whether your books of accounts are required to be audited under any law or not. Since you are planning to invest whole of the amount of sale proceeds more than the actual capital gains, you will get full exemption from payment of tax on long term capital gains on sale of the residential house under section 54.

(Views expressed by the expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts)