Buying a home on loan and selling it within 5 years since purchase will reverse the tax benefits gained on home loan principal repayment under Section 80C and make it taxable.
Here are the common reasons where you must cross-check before handing over your income tax return (as published in ET Wealth on Feb 13, 2012):
- Ignoring income from investment in the name of spouse, kids.
- Ending life insurance policy before 3 years.
- Not including interest income in your tax return.
- Not including ornaments in wealth tax.
- Receiving gifts and cash from persons other than blood relatives.
- Not paying wealth tax on second house.
- Both spouses claiming tax benefit on same expenses.
- Withdrawing PF within five years of joining a company.
- Taking benefit of basic exemption limit twice in a year.