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Capital Gain Tax Exemption Strategy When Selling Jewellery for a House

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Tax Exemption on Long-Term Capital Gain on Sale of Jewellery to Purchase a House.

Capital Gain Tax Exemption on Sale of Jewellery: Are you considering selling your jewellery to fund your dream home? Understanding the tax implications and exemptions can significantly impact your financial strategy. The Income Tax Act of 1961 offers provisions, particularly under section 54F, that can help you save on capital gains tax when reinvesting in residential property. Let’s delve into the details:

Long-term Capital Gains Tax:

If you’ve held your jewellery for three years or more, you’ll incur long-term capital gains tax, typically at a rate of 20 percent.

Claiming Tax Exemption:

However, there’s good news! Under section 54F, you can claim exemption on long-term capital gains tax by reinvesting the proceeds from selling your jewellery into a residential property.

Purchase Timing:

To qualify for this exemption, it’s crucial to time your property purchase correctly. You must buy the residential property either one year before or within two years after selling your jewellery.

Property Type:

Remember, the exemption applies specifically to residential properties, not just any real estate investment. Ensure that your purchase aligns with this requirement.

Limitations:

Taxpayers need to be aware that if they already own two or more residential properties, they cannot claim this exemption. Additionally, there’s now a maximum cap of ₹10 crore for claiming exemption, introduced in Budget 2023.

In summary, selling jewellery to buy a house can be a smart financial move, especially when leveraging tax exemptions provided by the Income Tax Act. By adhering to the timing and property type criteria outlined in section 54F, you can maximize your wealth while securing your dream home. Make informed decisions to optimize your financial future!

Also Read: CBDT Circular 7/2024: Deadline Extended for Charitable / Religious Institutions to File Form 10A & 10AB

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