Sold Property? 4 LTCG Deductions That Save Your Tax
When you sell property, you can reduce your taxable profit by claiming valid expenses. But claim the wrong ones and the tax department will send you a notice. Here is what you can and cannot deduct from your property sale profit.
Miss one valid deduction on a ₹2.63 crore sale and you could overpay lakhs in tax — more than 10 years of chai bills!
Wrong expense claims on your property sale can trigger a tax notice
Key Takeaways
Claim only allowable deductions — brokerage, stamp duty, registration fees, and genuine cost of improvement (renovation with bills) are valid LTCG deductions; household utility bills are NOT.
Keep all receipts and invoices for any structural renovation or improvement work done on your property before sale — these reduce your taxable capital gain legally.
Consult a CA before filing ITR if your property sale value exceeds ₹50 lakh — wrong LTCG calculation can result in a scrutiny notice and penalty interest under Section 234B.
When you sell property, you can reduce your taxable profit by claiming valid expenses. But claim the wrong ones and the tax department will send you a notice. Here is what you can and cannot deduct from your property sale profit.
Here's what happened: An NRI sold his Bangalore property for ₹2.63 crore, declared only ₹16.33 lakh as Long Term Capital Gains after claiming multiple cost deductions.. The income tax department rejected several expenses including home loan interest, water, electricity bills, and travel costs as inadmissible capital gains deductions.. The Income Tax Appellate Tribunal (ITAT) Bangalore partly ruled in the seller's favour, allowing certain legitimate cost-of-improvement and transfer expenses..
What you should do: Claim only allowable deductions — brokerage, stamp duty, registration fees, and genuine cost of improvement (renovation with bills) are valid LTCG deductions; household utility bills are NOT.. Keep all receipts and invoices for any structural renovation or improvement work done on your property before sale — these reduce your taxable capital gain legally.. Consult a CA before filing ITR if your property sale value exceeds ₹50 lakh — wrong LTCG calculation can result in a scrutiny notice and penalty interest under Section 234B..
Pro tip: Indexation benefit (using Cost Inflation Index) can dramatically reduce your LTCG on property sold before July 23, 2024 — always calculate both with and without indexation to pick the lower tax option.
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- [1]“NRI sells his Bangalore property for Rs 2.63 crore, declares Rs 16.33 lakh LTCG, gets tax notice; he fights and wins partial relief from ITAT for this reason” Wealth-Economic Times · 11 Jul 2026
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