Accrued Interst & LTCG

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Querist : Anonymous

Querist : Anonymous (Querist)

25 May 2011 Dear Sir
I have 2 queries

a. I have been gifted 1 COMMERCIAL property by my father by way of a excecuted gift deed. The property was constructed in 1961.My question is 1. what would be the capital gain if I sell the property today for Rs. 50 lakhs? 2. Can the net proceeds of net gain be invested in REC bonds to save LTCG? 3. Can i purchase a residential house against the sale of this commercial property and save tax? 4. What other options do i have to save on Tax?

b. I had invested in Company FD last year. Do I have take the accrued interst in my computation or can I take the entire gain in the year of the redemption of the investment and pay LTCG on it?

Thanks and Regards

Mehul K.

B N Rao

B N Rao (Expert)
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25 May 2011 Under section 54EC of the I T Act, 1961 if any long term capital asset if the capital gains is invested in long term specified assets (REC Bonds), you can get relief under section 54EC. There is no need to invest full realisation. You will get relief to the extent capital gains is invested. For capital gains, the cost to you will be the cost to your father in 1961. Since it is before 1.4.1981, the market value as on 1.4.81 should be adopted as cost of acquisition and index it with current index value (711 for this year).

Purchasing a residential flat will also enable you to claim deduction under section 54F of the I T Act. That has to be purchase within two years from the date of transfer of old asset or within three years from the date of transfer construct residential property. Full net consideration needs to be invested under this section. If less amount is invested, the capital gains will be percentage of [Investment / Total consideration * Capital Gains]

B. Investment in FD in a company: From your query it seems you have invested in Fixed Deposit and not any deep discount bond. Thus, you have to compute interest income on accrual basis every year.

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