Renovate your home, save on capital gains tax


ost of you would know that if you sell a property, you can save capital gains tax by investing in another property or buying 54EC or capital gains bonds subject to conditions. But, not many would not know they can claim tax deductions against home improvement expenses.

Let us understand the regulations around it and how you can claim the deduction.

“Cost of improvement refers to the capital expenditure by a person (you or previous owner) for making any addition or improvement in the capital asset. Expenses on improvement of house property are deductible while computing the amount of capital gain,” said Kapil Rana, founder and chairman, HostBooks Ltd.


“Home improvement expenses can be claimed against sale proceeds of a property to reduce capital gains income. This is called ‘cost of improvement’ and can be paired with ‘cost of acquisition’ of property,” said Sujit Bangar, founder,

How to claim it: Capital gains on sale of property are classified as short-term or long-term depending on the tenure for which you have held the property. In case the property was sold after 2 years, the gains will be classified as long-term while in cases where it was sold is less than 2 years, it is classified as short-term.

Short-term capital gains will be taxed by slab rate of the seller, while long-term capital gains will be taxed at the rate of 20% post indexation.


“If the property is held beyond 24 months, cost of improvement can be indexed to a higher amount than actual expenses,” said Bangar.

Indexation benefit helps reduce capital gains. It basically means cost of buying the property will be inflated to account for price rise over the period the property is held. This helps bring down the tax liability as the cost of acquiring the property goes up.

However, there are certain other expenses that can’t be included in cost of acquisition while calculating capital gains tax.


“Expenses such as property taxes, repair and maintenance expenses, estate duty paid on inherited property are not included in the cost of improvement,” said Rana. “Also, while computing capital gains, any cost of improvement incurred before 1 April 2001 shall be ignored,” he added.

Therefore, if you are selling your house, don’t forget to include these home improvement charges to bring down your capital gains liability.


Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.


Never miss a story! Stay connected and informed with Mint.
our App Now!!

Stay connected with us on social media platform for instant update click here to join our  Twitter, & Facebook


We are now on Telegram. Click here to join our channel (@TechiUpdate) and stay updated with the latest Technology headlines.

For all the latest Business News Click Here 

 For the latest news and updates, follow us on Google News


Read original article here

Denial of responsibility! TechAzi is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More