ADDITIONAL TAX LIABILITY ON SALE AND PURCHASE OF PROPERTY
LALIT
(Querist) 04 July 2010
This query is : Resolved
I am a salaried person paying regular income tax for the past 26 yrs. My annual gross salary is presently approx Rs 11,00,000.00
I had purchased a plot in Feb 2005 for Rs 6,83,800.00 and sold the same in Oct 2009 for Rs 52,60,000.00. Incidentally, to fill up the financial void, I also took home loan in Dec 2010 for Rs 25,00,000.00 from HDFC Bank. Based on availability of this sale consideration amount and home loan(ie Rs 52.60 lacs + Rs 25.00 lacs = Rs 77.60 lacs), in Dec 2010 I purchased a flat under construction on re-sale and agreed to pay the seller Rs 73,00,000.00 (including his profit)though the company price is Rs 50,81,337.00. From the total amount available (ie,Rs 77.60 lacs), what I have left is Rs 4,48,000.00 (Bank has kept it back from the loan amount for direct payment to the builder)as final payment to the builder on possession which is due in Aug 2010 and I have kept Rs 3,50,000.00 in savings account from the sale consideration for registry charges which is likely to be in Oct 2010.
Can you advice as regards if there is any additional tax liability for me from this property transaction alone. I am aware of my tax liability for the amount earned through salary hence it need not be calculated.In addition, is it in order to keep Rs 3,50,000.00 in savings account to pay for the cost of registry scheduled in Oct 2010 rather than in Capital Gains A/C as I have already spent more than the amount received from the sale consideration though it is after taking into account the loan amount as well.
Thank you.
A V Vishal
(Expert) 04 July 2010
Sale Price : Rs. 5260000
Actual Cost of Property : Rs. 683800
Indexed Cost of Acquisition : Rs. 900336
Capital gain on sale of property : Rs. 4369664
Since you have reinvested the entire sale consideration received towards purchase of new house property, your tax liability on account of capital gains will be NIL.
LALIT
(Querist) 05 July 2010
Thank you for your response to my first query on additional tax liability.
However, my second query remains unanswered which is, is it in order to keep Rs 3,50,000.00 in savings account to pay for the cost of registry scheduled in Oct 2010 rather than in Capital Gains A/C as I have already spent more than the amount received from the sale consideration though it is after taking into account the loan amount as well.
Could you please respond to this unanswered query as well.
VENKATRAMAN SHRINIVAS
(Expert) 05 July 2010
Mr.Vishal's reply clearly spelling out the manner of treatment that would be meted out is perfectly in tune with the current law.
As regards your second query whether 3.5 lakhs you retain for the purpose of registration, I would saay that purchase is complete only with the title getting transferred absolutely in your name. In view of this you should continue to retain the said sum in Capital Gains Investment account. May be due to the cost of the new asset far exceeding the consideration received on sale of the old asset, yet the transaction becomes complete in all respect only with the registration in letter and spirit. Hence the sum reserved for registration in my view should be continued to be retained in Caapital Gains Investgment account.
Vineet
(Expert) 05 July 2010
You have already invested in the new flat an amount (Rs 73 Lakhs) more than the long term capital gain earned (Rs 43.69 Lakhs). So there is no need to keep any sum in the capital gains account.
As far as exemption u/s 54 is concerned, if the builder has transferred allotment letter in you name, it is sufficient. It is advisable that you get the agreement to sale registered ASAP on safer side to avoid any complication which may arise due to incorrect interpretation of law by the Assessing Officer as it is a case of resale and not direct allotment by builder.
Kumar Thadhani
(Expert) 05 July 2010
Yes,I do agree with expert Mr. Vineet.
