Buying and Selling of Property, Plots, Flats, Land, Independent Houses, Floors or any other form of residential property is a frequent activity in present scenario. Especially with so much activity in the real estate sector, it has been considered to have given good returns. The attractive home loan schemes have made it even more lucrative. However, the transactions are often subject to complicated income tax structure. Here is one case that may solve some of your queries.
When you are about to sell a piece of land for a profit, it is quite likely that Capital Gains Tax would be imposed in the form of Long Term Capital Gain (LTCG). This remains a concern for a lot of people that how can they possibly avoid Capital Gains Tax arising out of the Long Term Capital Gain. In the present article we are discussing an example case.
In the present case the example assessee, an individual, is in the process of transferring a long term capital asset not amounting to a residential house and the proceeds are to be utilised to buy a capital asset amounting to residential house.
The treatment of capital gain on the transfer of capital asset not amounting to residential property is under consideration. Section 54F of the Income tax Act 1961 deals with the current situation.
Where the assessee is an individual, and capital gain arises from the transfer of any long term capital asset (not being a residential house) which in the present case is a piece of land (not amounting to agricultural land) and the assessee has within a period of one year before or after the date on which the transfer of the original asset has taken place, has purchased a residential house (new asset) or has constructed a residential house within three years; the capital gain shall be dealt as per the following conditions:
However, the capital gains exemption enumerated in (a) & (b) above is subject to the some conditions. The benefits as discussed shall not be available if:
If you have further queries on the subject of tax related queries, the experts in the panel would be happy to help you with sound tax advice.
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Hi Pankaj,
I did aggrement of my home for under-construction property in April 2008 while contruction were going on , where as we got O.C for the same property in 2010.
I am selling my home in May 2012, while calculating capital gain, should i calculate it as a short term capital gain or long term capital gain?
@Akash
It would be a short term gain as three years have not finished yet after taking possession.
dear pankaj,
I have just one question, if MR.B owns 2 flats, 1 shop, 1 agricultural land.
He sales agriculture land, shop and keeps the money in capital gain account.
Below are 3 cases, want to know how to overcome the problem.
Case 1 - He is planning to buy a new flat for which he will be selling one of his 1 flat also.
Case 2 - If he doesnt sale any of his 2 flats owned is he applicable to save income tax by buying new property.
Case 3 - If he wants to pay income tax on capital gain , how he can transfer the money as it is blocked in Capital gain account.
Appreciate your answer in simple words and in case wise format... :-)
@Sam
If at the time of sale of agricultural land and shop, he owned more than one residential properties, he won't be eligible for tax benefit u/s 54F.
If he sells out one flat before sale of these, 54F would be applicable.
For closing capital gains account, he would need clearance from assessing officer. After getting permission from AO, he can withdraw amount and pay taxes.
dear pankaj,
Will appreciate if you can help me with the following question:
Q1.If the person was a salaried retired person with total income 25 lakh for his 20 years service of which assuming he spends 10 lakh for his/ family expense ,suppose he owns a balance sheet of 30 lakh and was having a agricultural income which he never declared in income tax returns. In such case will the agricultural income can be consider as source of money for buying properties which he own of 30 lakh.
Q2. Suppose a women balance sheet is 40 lakh assuming all her expenses where taken care by her husband. Assuming she had 2 shop, 1 flat for which she had a rent income as total 25 lakh till date and 15 lakh as agricultural income ( assuming 10 years as a period). Women havent filled income tax till date, will like to know in such case what wil be penalty / income tax she needs to pay till date...
@Sam
We don't take such professional cases. This forum is only for helping common people with simple queries.
Dear Pankaj Ji,
I purchased flat in May 2005 & sold in Aug 2012, so it falls under LTCG. I purchased another new under construction flat in June 2010 (registration done) & possession is not done yet . Can i claim LTCG adjustments in this scenario ?
Many thanks in advance fr ur advice n time
Regards
V.Shah
@V Shah
If you get possession for the new flat before Aug 2014, you may take tax benefit for new property purchase.
Hi Pankaj,
To avoid short term capital gain, i m investing in two underconstruction properties , can i show stamp duty & registration amount also as investment , what else i can show as a investment other than capital saving bond.
@Akash
There is no way to save income tax on short term gains.
I have constructed a house in the year 1993. Further I have purchased a flat in the year1999 and sold this flat in Sept 2011. Now Iwould like to purchase house property for exemption on capital gain Tax. Please tell me the time limit purchase/construction of new property.
@L.Bhasskara
In order to save income tax on capital gains from flat sold in Sept 2011, possession for new residential property must be taken before Sept 2013. In case construction is getting done yourself, it should be completed by Sept 2014.
Hi Pankaj,
I obrought house in 2010 for 13,00,000 ( excluding stamp duty ) and selling it now in 2012 for 30,00,00 and using same money I am buying a new home for 42,00,000 , how can i save my shortterm capital gain?
@Santosh
There is no way to save income tax on short term capital gains.
17 lakh (minus stamp duty charges for purchase) would be added to your taxable income and taxed as per your slab rates.
If I received money as a result of sale of plot from my father, how can I sve income tax on this capital gain? if i purchase agricultural land Is it useful to save tax?
@S C Chaudhari
Income tax would be payable on long term gains to the seller. If plot was on your father's name, he would need to pay taxes. Tax saving would be applicable if he invests into another residential house property.
There won't be any tax benefit on purchase of agricultural property if sold property is not agricultural.
Hi sir please help me out regarding this
The land belongs to '' X '' and he has entered into an agreement with ''Y''(who is a builder)
the contract is to construct the apartments and give 41% of apartments to me and he must take over 59% of apartments and for this a power of attorney is executed and as per income tax provision and a case law of Jabasir singh sarkaria (2007) (AAR) its held that tax need to be paid the moment power of attorney is executed and to avoid such tax in power of attorney a clause need to be made stating that the power is given to builder only on completion and not otherwise
My question is to know tax planning of 59% i.e.., can X transfer it to his wife or daughter and claim exemption and how can i make the documents so has to give right on the property only after completion of the project and not otherwise
Need a urgent reply
Dear Pankaj,
My parents bought a plot of land in 1992 from a land developer. They paid the entire consideration in 1992 and received receipts for the same. The plot was, however, registered in their name via a registered agreement after payment of stamp duty in the year 2001. Now they intend to sell it.
1. For calculating LTCG what would be considered to be the year of purchase, 1992 when the plot was bought from the developer or 2001 when the plot was registered.
2. My mother does not have any income. So, she does not file returns. However, this year she will have income in the form of LTCG from the above sell. Could you tell me the total income tax that she will have to pay. Will it be (LTCG-Basic Exemption) * 20%
Regards
@Suresh
1. In case they got possession of plot in 1992 (possession/handover letter would be needed), then LTCG can be computed with purchase year as 1992.
2. If there is no other income, LTCG would be reduced by basic exemption and then taxable at 20% rate.