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Rent vs. Fixed Deposit |
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My mother has a house which fetches her a monthly rent of Rs. 5,000. Recently I explored with some local brokers and was told that this flat can be sold for about Rs. 45,00,000.
Is it a good idea to sell this flat and invest in some other tools (not necessarily in real estate) or should we hold it and enjoy the rental income.
Also somebody please advise how much capital gains tax will have to be paid for this (the property was purchaged in 1972).
Thanks. |
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Re: Rent vs. Fixed Deposit |
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Rajiv
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| 27 August 2008, 11:20:50 |
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Dear Kumar
I think, the choice of whether you should carry it on with Rent or Sell the property and invest proceeds in a fixed deposit Should be guided by the following factors
a) What is your monthly income requirement?
b) What's the property purpose? Investment/Legacy/Self-use sometimes later
c) Comfort with current administration of collecting rent and property maintenance
As you know yourself that on the face of it, you will make more money with an FD @ 10% on 45 lacs as compared to 60,000 per annum that you make now. However, this ignores the appreciation that a property can achieve in value as well as rent over a period of time.
I must also add that in my view property administration is a big headache and inheritances also create differences within the family. Having said that if you can manage the above two aspects and DO NOT have a dying need for extra income, it may be worth holding on to the property than coverting it into cash as property can give you capital appreciation apart a small but increasing regular income
Wrt your query on Capital Gains, I'm not a CA but can tell you that broadly you'll have to pay 20% tax on the gains post indexation (Base Index 1981=100). This can be saved if you invest in capital gains bonds u/s 54EC but it may not be worth it |
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Re: Rent vs. Fixed Deposit |
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Thank you Rajiv for helping me make my decision. |
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