The gains made on selling a house are taxable as capital gains, but there are certain deductions available to the seller of a property. While selling a property, the seller has to incur expenses such as brokerage or commission of the broker, cost of stamp paper and travelling expenses relating the transfer of the property. These expenses can be claimed as deductions by the seller.
Apart from the above deductions, a seller of property can claim exemption under Section 54 from capital gains tax if the proceeds received on sale of property are reinvested in buying another property.
However, to get the benefit of this exemption, the seller has to buy the new property one year before the sale of the property or within two years after the sale of the property. If the seller reinvests the gain made on sale of his property in construction of a new property, the construction of the new property has to be completed within three years of the sale of the old property to claim an exemption from capital gains tax.
Hence, one can save a good deal of amount if one reinvests the capital gains made in new property and also avails the benefit of deduction available on expenses incurred on the sale of property.