Kumar R. (Executive) 28 August 2009

Query Regarding capital gain on sale/purchase of property

Please Assume the following scenario.

If a residential house is purchased in Jun'2001 for Rs. x and the same is sold in Aug'2009 for Rs. y . It is understood that the LTCG will be calculated based on the indexed cost which will be z = y-(x*(CII in 2009/CII in 2001).

Now if another house is purchased in Mar'2009 (which will fall under within one year before clause of section 54 ) from own resources without taking any loan. Please clarify whether in this case the rebate on Long Term capital gain will be available under section 54 of IT act or Not.

ADDITIONAL DETAILS:

Please also clarify - if suppose the first house property (which is sold in Aug'2009) is in the name of husband. And the property which is purchased earlier (i.e. Mar'2009) is in the joint names of husband and wife (Both are earning members and are itax assessee). Can the rebate on capital gain arising on sale of the house (which is in the name of husband) be claimed ?. Who has to declare the new house (which is in joint name) in the return husband OR wife??

The new property has been acquired without taking any loan and in the registry the share of each co-owner is not mentioned. Then how it will be ascertained that whose share is how much? Or it is considered 50:50 where no share is clearly mentioned in the registry. Please calrify these points. Also who has to show the property in the return Husband or wife, if both can show then how and under which column in ITR-2.

Thanks & regards.

Kumar

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7 Replies

Sivadas Chettur (Chartered accountant) 29 August 2009

Dear Kumar,

The law did not put the condition that the source for purchase should come from the sale proceeds of property. Since you can purchase the property even before sale you are entitled to get Sec54 benefit.The legislature is presumed to be aware of all these matters and having provided for the benefit without conditions I am sure you will get it.

Reg the purchase in the joint names you carry a little bit of risk since the dept may decline to grant the benefit on the ground that you are not the full owner and the ownership is shared. At best you can claim half share and get the corresponding relief. The legislative intention obviously is to encourage persons to own a house as a welfare measure. You may also take notice of the words used in the section ie ASSESSEE. Hence the assessee should purchase the property and that legal requirment cannot be met fully if you purchase it in joint names. The other extreme stand could be that you can plead that your wife is a benami and you are the legal owner but the implication of Benami Prohibition act 1988 may be kept in mind (where the disability is that you cannot have recourse to court for declaration of your ownership-I presume)

sivadas chettoor

siva208@yahoo.com

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modi kamal (business) 07 September 2009

Dear Sir/Madam,

I bght a residential terrace flat in A.Y 1989-90 for Rs.12.50 lakh along with TDR rights though it was not allowed at that period of time.Now I am selling the same for Rs.2.50 Cr.Out of this sale proceed I will be buying a flat worth of Rs.1.00Cr.

1.How much tax I pay to pay or alternatively park in Govt.bonds?

2.How to calculate indexation?What are the index cost of A.Y1989-90 and 2009-10.Please show me the method.

A V Vishal (Advocate) 08 September 2009

Dear Modi

The Formula for computing indexed cost is (Index for the year of sale/ Index in the year of acquisition) x cost.

If the property purchased in 1988-89 for Rs 12.50 lakh were to be sold in 2009 -10 for Rs 1.00 Crore, indexed cost = (582/161) x 12,50,000 = Rs 45.19 lakh. And the long-term capital gains would be Rs 54.81 lacs, that is Rs 1,00,00,000 minus Rs 45.19 lakh.

The LTCG tax will be 20% of Rs.54.81 Lacs, However, you have different options to invest the capital gains to save taxes. You need to contact a local Chartered Accountant who can guide you properly.

P.S: The CII for 2009-10 is not yet notified hence, the CII of 2008-09 is considered as an Example.

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modi kamal (business) 22 October 2010

Dear Friends,

I bought a terrace flat in A.Y 1988-89 for Rs.12.50 Lac.In A.Y 2007-2008 (3 years already passed) I bought TDR made additional floor on said premises.I spent Rs.35 Lac on TDR & construction cost.So my total investment in this flat is Rs.47.50 Lac.Now I sold the whole property for Rs.2.90 Cr.(Deal just finalised).Payment to be received in 1 month.Somebody was telling me to invest in REC U/S 154.What is the limit?What is the duration of investment & interest rate?

What are my tax implications?I also plan to buy a flat worth of Rs.1.50 Cr for my self use.

Kindly advice.

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 22 October 2010

Dear Modi,

Section 15 H lays down that in case the new specified asset is transferred or converted into money or any loan or advance is taken against the security of such new asset within 3 years from the date of its acquisition, the amount of capital gain arising from the transfer of the original asset not charged to tax, shall be deemed to be income for the previous year in which the new asset is so transferred or converted.

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modi kamal (business) 22 October 2010

Dear Ramachary,

Your answer is not clear to me as I am lay man in field.Can you explain in details to my specific questions?

B.K.Malhotra (PROPRIETOR) 17 February 2012

I, purchased a floor in the year 2007 by making payment from my Bank but got it registetred in the name my of my daughter and got a GPA from her. Before her marriage, I, got the floor registered in my name by executing sale deed as GPA in the year 2011 on the same value at which floor was purchased, without taking any money from her since the floor was purchased by my money. Since I only got the floor registered back in my name, will the transaction attrack long term caital gain tax.

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