capital gains tax
Querist :
Anonymous
(Querist) 28 April 2011
This query is : Resolved
I had bought a flat for for Rs.82000 in Aug'94 and sold the same for Rs.9,55,000 in March'11.
Meanwhile I had started construction of a new house on a pre-owned plot of land in October'08 solely relying on the sale proceeds of the flat to meet out the cost of construction. The sale of flat however took a long time to mature. I expect to complete the construction sometimes in june'11.
Can I adjust the capital gains tax acrued against the cost of construction and claim exemptions?Are their any special exemptions available to me being a lady?
Arun Bhatia
(Expert) 28 April 2011
Madam,
In your case, appox capital gain works out Rs 730000/ appox. And this is fully exempt under section 54 of the income tax act, if the cost of construction is equal to or more than Rs 730000/-. The date of commencement of construction is irrelvant but the same should be completed within a period of three years from the date of tranfer of house property. No other exemption is available to you being a lady.
Querist :
Anonymous
(Querist) 28 April 2011
Thanks! This is what I thought.
MUKESH SHARMA
(Expert) 15 May 2011
Computation of capital gain tax for sale of property in FY 2011
Sale Price : Rs. 955000
Actual Cost of Property : Rs. 82000
Indexed Cost of Property : Rs. 0
Profit on sale of property net of all expenses : Rs. 955000
Holding period : 17 years and 7 months
Long term capital gain tax rate applicable : 20 %
Long term capital gain tax : Rs. 191000
Net profit on sale of property : Rs. 764000
In your case total capital gain is. rs. 764000/- as you are constructing house on land purchased by you earlier and you have sold the property in march -11.
you must keep in mind the following issue
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:
If the cost of the new asset is more than the net consideration received in respect of the original asset, the whole of such capital gain shall not be charged to capital gain tax as per section 45 of the Income Tax Act.
If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears the cost of the new capital asset shall not be charged to capital gain tax as per section 45 of the Income Tax Act.
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 the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset.
If the assessee purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset
If the assessee constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset.
Querist :
Anonymous
(Querist) 15 May 2011
Dear Mukesh ji,
I would like to draw your attention to following facts-
1.The asset sold by me is a residential house and not a piece of land.
2.It seems that you have not deducted the appreciated value of proprty according tolong term capital gains index from total sale proceeds.
3.I also utilised the sale proceeds to repay the housing construction loan taken for the new property in question.
In the light of the above facts pls.give your fresh opinion and oblige.
