Capital gain tax is not new for investors in real estate. Capital gain tax is tax you pay for capital gain you made by transferring capital. Capital gain is gain or profit derived from sale of capital investment such as property, shares, mutual fund, debentures etc. If you sell the property or capital investment for price more than what you bought is called capital gain and if the transfer is made for price less than purchase price is called capital loss.
Re-investment on residential property is best way to avoid capital gain tax. You can avoid paying capital tax if you re-invest the capital gain in any residential property which is either ready to occupy, construction in progress or purchasing any plot for construction of new house.
If you are re-investing capital gain for new house which is ready to occupy, you must invest within one year or two years after transfer. If you re-invest capital gain for purchase of residential property within specified time you can claim full exemption. If you are re-investing capital gain for buying plot to construct a new house, construction must be completed within three years from date of transfer.
Investors are attracted to real estate with lower rate of interest on home loans and cut down in stamp duty for registration of property. Now you can avoid capital gain tax on your capital gain by re-investing on your dream property.
