Tax on Commercial Property: Your top queries answered

financialexpress.com:

Can you explain the tax implications for investors in commercial real estate in India regarding long-term capital gains (LTCG) and short-term capital gains (STCG)? How are these gains taxed, and what factors determine whether a gain is considered long-term or short-term?

Assuming the investor is an individual and is holding the commercial real estate as capital asset, the commercial property will be regarded as a long-term capital asset if held for more than 24 months, else it will be treated as a short-term capital asset.

Long-term capital gains will be taxable at 20% (plus surcharge cess – highest effective could be 23.92%), and short-term capital gains shall be at applicable slab rates (highest effective rate could 39% assuming new regime).

Could you elaborate on the tax relief provided under Section 54F of the Income Tax Act for investors in commercial real estate? What are the conditions and timelines that investors must adhere to in order to benefit from this exemption?

Section 54F of the I-T Act provides for tax exemption to individuals and HUFs on capital gains arising from transfer of any long-term capital asset (other than a residential house) where the sale proceeds is invested in one residential house in India i.e. the new resident house is purchased 1 year before or 2 years after date of transfer or constructed within 3 years from date of transfer.

Exemption amount shall be = Capital gains amount * Cost of new asset

Sale consideration

Further, the exemption is subject to the following additional conditions:

(i) The investor does not own more than one residential house on the date of transfer of the commercial property;

(ii) The new residential house is held by the investor for a period of 3 years from the