vinaya (Student CA IPC / IPCC) (74 Points)
13 May 2015Greetings.
Incase of Long Term Capital Gain arising from sale of property (other than securities listed or unlisted), is there a chance for opting between 10% without indexation and 20% with indexation? Kindly mention the section or any referance.
Thanks in advcane.
CMA Poornima Madhava
(CMA)
(13097 Points)
Replied 13 May 2015
Option is available only in respect of the following long term capital assets:
Sai Ganesh
(Article Assisstant )
(254 Points)
Replied 13 May 2015
Sorry madam your not having any other chance of getting opting between 10% without indexation and 20% with indexation except in following cases as said by Poornima Mam,
Rajesh Kumar Gupta
(Senior Divisional Manager)
(714 Points)
Replied 13 May 2015
SHINY
(CA Final Student)
(699 Points)
Replied 14 May 2015
To avoid paying LTCG Tax, u can opt for Sec 54 EC/54F of IT Act etc i.e investing the Capital Gain amount as per these sections.
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 21 May 2015
Thank you all for the response. :)
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 22 May 2015
Yaa Ma'm, Poornima Madhava I've already gone through the section, but failed to locate this point. Kindly help me understand.
48[Tax on long-term capital gains.
49112. (1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head "Capital gains", the tax payable by the assessee on the total income shall be the aggregate of,—
(a) in the case of an individual or a Hindu undivided family, 50[being a resident,]—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income ; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent :
Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent ;
(b) in the case of a 50[domestic] company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of 51[twenty] per cent :
52[***]
53[(c) in the case of a non-resident (not being a company) or a foreign company,—
(i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and
54[(ii) the amount of income-tax calculated on long-term capital gains [except where such gain arises from transfer of capital asset referred to in sub-clause (iii)] at the rate of twenty per cent; and
(iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset, being unlisted securities, calculated at the rate of ten per cent on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48;]]
55[(d)] in any other case 56[of a resident],—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income ; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of 57[twenty] per cent.
Explanation.—58[***]
59[Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, 59a[being listed securities 60[or unit]] 61[or zero coupon bond], exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.
The following second proviso shall be inserted after the existing proviso to sub-section (1) of section 112 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided further that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being a unit of a Mutual Fund specified under clause (23D) of section 10, during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, exceeds ten per cent of the amount of capital gains, before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.
62[Explanation.—For the purposes of this sub-section,—
63[(a) the expression "securities" shall have the meaning assigned to it in clause (h) of section 264 of the Securities Contracts (Regulation) Act, 1956 (32 of 1956);
(aa) "listed securities" means the securities which are listed on any recognised stock exchange in India;
(ab) "unlisted securities" means securities other than listed securities;]
64a[(b) "unit" shall have the meaning assigned to it in clause (b) of Explanation to section 115AB.]]]
(2) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
(3) Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset, the total income shall be reduced by the amount of such income and the rebate under section 88 shall be allowed from the income-tax on the total income as so reduced.
Thank you.
Z
( )
(2960 Points)
Replied 22 May 2015
"in any other case [of a resident],—
(i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income ; and
(ii) the amount of income-tax calculated on such long-term capital gains at the rate of [twenty] per cent."
[Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, [being listed securities[or unit]] [or zero coupon bond], exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee
(That is before giving effect of indexation, tax payable shall be RESTRICTED to 10%) [EXCESS SHALL BE IGNORED]
& this proviso is applicable only on listed securities[or unit] [or zero coupon bond]
As told by other members
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 22 May 2015
Thanks a lot.
Now another doubt is, u/s 54 if the amount of capital gain is deposited in a scheme notified by the Central Govt. before the date of filing return u/s 139 the amount must be utilised for the construction of a residential house property within 3 years from the date of transfer of original asset.
Does utilising of such amount for construction include purchase of land upon which a house can be constructed?
Z
( )
(2960 Points)
Replied 22 May 2015
Yes and there is also CBDT circular (No. 667, dated 18-10-1993.) clarifying that cost of the land is an integral part of the cost of the residential house property . Hence exemption shall be allowed
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 25 May 2015
As per Circular No.667 as provided by you, land can be purchased and construction shall be finished with in 3 years. In case Capital gain is of Rs.1Cr., land of value Rs.98 lakhs is purchased and with the remaining Rs.2 lakhs a small shed had been built, Is this valid and the exemption be claimed ?
Please reply as soon as possible.
Z
( )
(2960 Points)
Replied 25 May 2015
Will you call a shed as a residential house property?
There have been few cases on this in past wherein court had to define that building should have walls, lively, etc
A Mere shed would not be called as a residential HOUSE property. Expenditure should be genuine
Further note that this 3 year condition is for INVESTMENT (as held in several High court judgements) [Have mentioned some on my profile page] and not for construction
Even before this circular , the language of the relevant sections [54 & 54F] were same and the judgements are based on those sections
Even in the amendment made by F.A 14 , the word used in the section is still constructed
And there are many high court judgements allowing the exemption
A circular can not over ride courts judgement.
B.B. Sarkar v. CIT [1981] 132 ITR 150 (Cal.). "The main purpose of the statute is to give relief for the acquisition of a new residential house. In that context, it does not really matter whether the new residential house is partly constructed or partly purchased."
In the case of Satish Chandra Gupta v. Assessing Officer [1995] 54 ITD 508 and Tribunal after considering the provisions of section 54 as well as section 55 held that the claim cannot be denied on the ground that the construction the house started by the assessee was not completed within the stipulated period of three years and some work was carried out thereafter.
"Commissioner of Income-tax v. R.L. Sood :- The assessee had paid a sum of2,39,850 out of the total sale consideration of2,75,000 for the purchase of the flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dated September 25, 1981, i.e., within four days of the sale of his old property, the assessee acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of section 54 of the Act. Merely because the builder failed to hand over possession of the flat to the assesee within the period of one year, the assessee cannot be denied the benefit of the said benevolent provision. "
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 25 May 2015
431. Whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also
1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date constructed, a residential house. The quantum of deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also.
2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also. The Board are of the view that the cost of the land is an integral part of the cost of the residential house, whether purchased or built. Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections.
Circular : No. 667, dated 18-10-1993.
But here I can see, it is clearly mentioned that the construction must be completed within 3 years.
CAclubindia
