'₹1.87 lakh nearly lost in real estate tax': Advisor flags mistake many sellers make

A costly mistake nearly forced a homeowner to overpay ₹1.87 lakh in taxes—and the same error could be quietly draining money from thousands of property sellers across India.

Sujit Bangar, founder of taxbuddy.com, shared on LinkedIn how one taxpayer failed to account for key allowable expenses while calculating capital gains on a home sale. The individual had deducted only the purchase price of ₹80 lakh from the ₹1.2 crore sale, ignoring lakhs in legally deductible costs.

Under Section 55 of the Income Tax Act, sellers can reduce taxable capital gains by including specific costs in the “cost of acquisition” and “capital improvement” categories. These include:

• Stamp duty and registration fees
• Brokerage or commission
• Major structural renovations
• Legal and documentation charges
• Unclaimed home loan interest (if not already used under Section 24(b))

In this case, missed expenses like ₹4.7 lakh in registration charges, ₹6 lakh in renovations, and ₹3 lakh in loan interest would have inflated the tax bill dramatically—if not caught and corrected with proper documentation.

Bangar emphasized the importance of distinguishing between routine maintenance and true capital improvements. Fixing a leaky tap or painting walls? Not deductible. Installing a modular kitchen or adding a new floor? Deductible—if you have the bills.

He also issued a warning: the Income Tax Department now uses AI to scan for suspicious or inflated claims. “Avoid forged or backdated bills,” Bangar wrote. “Keep invoices with payment proofs.”

With India’s property market heating up, tax oversights like these could quietly cost sellers lakhs unless they know—and document—what truly counts.