How is the Capital Gains Tax calculated on a Primary Residence?
Capital Gain Tax, as the name implies, is calculated on the capital gain made on the property. Capital Gain is the profit that the property owner makes when his primary house is sold. It is the selling price of the property less its base price. The selling price is the amount collected from the buyer for the purchase of the house. On the other hand, the base price is the amount paid to get the property. This includes the actual cost of the property and all other costs spent on it. Also, the advertising cost, VAT and transfer rates are also included in it. This tax is payable the same year the property is sold. How this happens is, twenty five percent of the capital gain is added to the seller’s income and the income tax is calculated normally. But what happens if the property’s value is not up to R 1.5 million or the land is less than 2 hectares? The answer is simple. No tax is paid on it. Also, the amount deduction only applies to primary residences and not to business.
