New Income Tax Bill 2025: Key Property Tax Changes Simplified - 21.02.2025 - HT
The Indian government has introduced the New Income Tax Bill 2025, aiming to simplify the tax system and replace the Income Tax Act of 1961. Among the major changes, the handling of property-related losses and capital gains is one of the most significant. Let’s break it down in simple terms.
1. Carry Forward of Losses from House Property
If you suffer a loss from your house property, you can adjust it against other income sources like salary or business income, but only up to ?2 lakh per year. Any remaining loss can be carried forward for up to 8 years but can only be set off against income from house property in those years.
Example: Rajeev earns ?9 lakh from his salary but incurs a ?5 lakh loss on his house property in the same year. He can adjust ?2 lakh of this loss against his salary, reducing his taxable income to ?7 lakh. The remaining ?3 lakh loss can be carried forward to the next year and adjusted only against future house property income.
Important Note: If Rajeev doesn’t have any house property income in the future, he won’t be able to utilize the carried-forward loss.
2. Capital Gains Exemption on Property Sale
If you sell a property and reinvest in another, you may be eligible for a tax exemption under specific conditions:
However, if the capital gain is more than the cost of the new property, the excess amount will be taxable.
Example: Rina sells her old home and makes a capital gain of ?80 lakh. She buys a new property for ?1.5 crore within two years, so she doesn’t have to pay any capital gains tax.
However, if Rina sells her new property before three years, the exemption she claimed earlier will be reversed. The purchase price of her new property will be reduced by ?80 lakh for tax purposes, increasing her taxable capital gains.
Key Takeaways:
? Loss Carry Forward: Losses from house property can be set off against other income up to ?2 lakh per year. Any excess loss can be carried forward for up to 8 years but only against future house property income.
? Capital Gains Exemption: Selling a property and reinvesting within the allowed timeframe helps avoid capital gains tax. However, selling the new property before three years can lead to additional taxes.
These changes aim to simplify taxation for property owners. Stay updated with the latest amendments before the bill is finalized!
#TaxUpdate #IncomeTax2025 #PropertyTax #Finance
?