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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Sir ,
1 ) I have purchased a Flat in Mar 2007 for a price of 9.25L and i have sold it in July 2011 for a price of 18.25 L . secodnly i have Paid Loan amount of 6 Lakh to bank from 18.25 L which i haev got .
2) I have another Residential Land with My Name which was purchased in 2010
Could you pls help me what would be the Capitaz Gain Tax in the case of above
@Sridhar
You will have to pay around 85000 as income tax on long term capital gains. Please see computation below.
Purchase Year = 2006-07, Purchase Cost = 925000, Cost Inflation Index (CII) for purchase year = 519
Sale Year = 2011-12, Selling price = 1825000, CII for sale year = 785
Indexed Purchase price = 925000 x (785/519) = 1399085
Long term capital gain = 1825000 - 1399085 = 425915
Income tax on capital gain = 425915 x 20% = 85183
I have a residential plot purchased by my father for 48000 in 1970 in my name.
Current value is 2.6 cr.
I have 2 more residential houses in my name. I have one wife, son and daughter.
I have these houses bouught before 2009.
Please suggest how I can save LTCG
@GaneshK
As you already have two houses in your name, you won't be able to save income tax on long term capital gains under section 54F.
But you can invest into capital gain bonds under section 54EC to save some part. Max limit for investment in these bonds is 50 lacs per financial year. Investment has to be done within six month of property sale.
Dear Sir
For a 50 lakhs house how much will be the tax for this home. Its built in 16 cents.
@Achu
We are not able to understand your question.
Please use following method to compute capital gain and income tax:
Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%
I have purchased a vacant plot for Rs 200000 in the year 2000 and sold the same for Rs 1400000 in the year 2011.I have purchased a vacant plot for the same amount Rs 1400000. I have also one more vacant plot in my name.Can i get any exemptions on capital gain
@Smitha
No exemption is available under section 54F on buying a plot, but if you construct a house on new plot within next three years of sale, exemption will be available.
You should not own more than one residential house properties while constructing new one.
Hi,
I sold a property and the LTCG was around Rs. 90lacs. Now my husband has a land in his name which was leased by the state govt to him for 99 years. Can i construct a house on that and save tax u/s 54?
@Hemali
You should be owner of the property to get tax benefit.
New constructed should be in your name (joint or single owned)
Thanks Pankaj!
Just wanted to know if the wife needs to have an agreement with the client to ensure that the constructed property remains in her name or joint name? what kind of an agreement, if yes?
@Hemali
Did not get your question.
If your husband can first transfer land to your name and then you construct house on that, it will be eligible for tax exemption.
Hi Pankaj,
Its a leased land from State Government, cannot be transferred to his wife's name. Hence the above query, not sure if they can have agreement for the constructed property.
Thanks again!
Hemali
Pankaj,
The gold I'd bought a few years ago quite cheap at 9000 INR per 10 gm, I've sold for about Rs. 4 Crore now. I don't want to be stuck with a huge capital gains tax and wealth tax. I don't want to invest in govt. bonds because my money is parked for 3 years with very low returns.
I want to invest the proceeds in commercial real estate, but not on my name but on the name of my company (limited partnership) mainly because I don't want to be sued if something happens. I've heard that we don't have to pay wealth tax on commercial real estates. If so, how do you suggest I best minimize my taxes?
Thanks a lot!
@Sayyad
If the gold is sold before completion of three years, it will be short term gains and no exemption is allowed for saving income tax.
Income tax on long term capital gains can only be saved by buying residential house property (u/s 54F) or buying capital gain bonds (u/s 54EC).
If you invest in commercial property, no tax benefit can be availed.
Hi,
My wife bought a residential plot for Rs 5 lakhs in april 2005. Now we are planning to sell it for 15 lakhs and buy a commercial shop worth 10 lakhs. How do we minimise the LTCG tax.
@Rahul
There is no tax benefit if you invest into commercial shop.
Income tax can be fully saved if you invest whole sale amount into a residential property (u/s 54F) or into capital gain bonds (u/s 54EC).
I have purchased a property in 10 FEB 2003 and I am planning to sale the property
I have few queries
1) the property is jointly name of me and my mother (She is a house wife and does not have any income).I have made all my payments using my income When I sell the property will my mother need to pay tax since the joint owner?
2) I have already purchased an under construction property in May 2010 and made an agreement in July and I will receive possession some where in march next year i.e. 2012 .Which date is consider for capital gains tax? Date of possession or date of agreement or date of booking .If I sell the property do I benefit from the new property?
3) New property purchased is in my and my wife name jointly .She is also a house wife. How much percentage of amounts is considered for capital gains tax?
4) I have taken loan for new property .Does these properties qualify for capital gains benefit If I Have taken loan?
@Nilendra
1. Your mother would have to pay taxes on her share of capital gains. If the whole purchase amount was paid by you, then whole gains would be taxable in your hands.
2. As you purchased a new residential house property, you may claim tax exemption on long term gains. Possession date can will be considered as purchase date. If you sell new property within next three years of purchase, tax benefit would become void.
3. Only cost of your share in new property will be considered for long term gains benefit.
4. Even if you have taken loan, you can still claim for tax exemption.
How is the share decided? by amount paid by cheque/dd .. Or is there any other mechanism
@Nilendra
Share will be decided by ownership ratio. While registration of property, you can have this mentioned in papers. If not mentioned, equal portion will be assumed for all joint owners.
" If not mentioned, equal portion will be assumed for all joint owners"
Is there any way after registration where we can mention the ratio may be something like a mutual agreement on stamp paper between the owner mentioning the ratio and is valid and accepted by law and tax authorities
@Nilendra
I think, it can be changed by co-ownership agreement.
Please consult a property expert in this matter.
Dear Sir,
Which date i.e agreement date, stamp duty date, registration date or possession date is taken for calculating the period of 36 months for LTCG on sale of residential flat?
regards
Hitesh
@Hitesh
Generally its registration or possession date. You can treat one of these whichever is earlier.
Sir,
I own a Apartment and a residential land (bought in 2007). Now I am buying a land and would like to construct a house. For this I need to sell a part/whole of the residential land. Can I put the profit gained from selling this land into the construction of the new house to avoid Long Term Capital Gain Tax?
@Anup
As per section 54F, to save income tax arising from long term gains (from selling plot), amount can be invested into construction of a new residential house property.