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A Comprehensive Guide on Tax and ITR Filing for Property Sale


ITR Filing for Property Sale

Selling a property involves various financial considerations, especially taxes and filing the Income Tax Return (ITR). This article will delve into the intricacies of handling tax implications and ITR filing when selling a property, using a real-life scenario as an example.

Understanding the Transaction:

In the case presented, the individual’s mother purchased a piece of land for 8 lakhs 12 years ago and is now selling it for 33 lakhs. The circle rate of the land is 17 lakhs, and the primary concern is handling the balance amount to minimize tax liabilities.

Execution of Sale Deed:

The suggestion here is to execute the sale deed at the actual transaction value and offer to pay the buyer the differential amount of stamp duty. This approach ensures transparency and legality in the transaction. Accepting the difference in cash, even through online transactions, may lead to tax implications and the need to explain the source of funds.

Tax Implications on Profits:

As the property has been held for more than 24 months, the profits from the sale qualify as long-term capital gains. The mother should invest the sale proceeds in buying a residential property to minimise tax liabilities. Section 54F exempts long-term capital gains if the sale proceeds are invested in a residential house, subject to certain conditions.

Conditions for Exemption under Section 54F:

  1. The residential property must be purchased within two years from the plot’s sale date.
  2. If opting for self-construction or an under-construction property, the construction must be completed within three years.
  3. If the full amount is not utilized by the ITR filing due date, the unutilized money should be deposited in a bank account under the Capital Gains Account Scheme, which can be used for property purchase within the prescribed time.

ITR Filing Requirement:

According to income tax laws, individuals must file an ITR if their total income before any deductions and exemptions under Section 54F exceeds the basic exemption amount. Therefore, even if the mother has no tax liability due to the exemption under Section 54F, she is obligated to file her ITR.


When selling a property, handling tax implications and ITR filing requires careful consideration of legal and financial aspects. By following the recommended steps, such as executing the sale deed transparently and adhering to the conditions for exemption under Section 54F, individuals can maximize returns and minimize tax liabilities in property transactions. It is crucial to seek professional advice to ensure compliance with tax regulations and make informed financial decisions.


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