Capital gain on sale of property

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NIKI (Querist)
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08 September 2013 A Pearson sold a property for Rs 60lac which was inherited to him from mother,
He decides to invest Rs. 35lac in buying other house and other 25 lac to send to his brother.

Q1)Long Term Capital Gain will charged on the whole or only 25lac?

Q2)And how much will be the tax rate ?

Q3)Is the index Slab and Date of acquisition applicable here ?

Q4)Any other suggestion to save the Capital Gain Tax ?

CA Vikas Acharya

CA Vikas Acharya (Expert)
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09 September 2013 First u need cost of acquisition.of property my mother
Now index that value
Deduct indexd. Value frrom sale figure remaining is capital gain
It could be more than 20 lac or less depending upon cost of property. Now invest only the amount of gain in another house. U are free to use remaining amt. Out of sale.
Whole the tax can be saved this way. Though tax rate is 20% in case of such capital gain if amount not invested within prescribed time.

CA Vikas Acharya

CA Vikas Acharya (Expert)
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09 September 2013 That's by instead of my in first line.

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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09 September 2013 Calculate Capital gain as follows:

Consideration received on sale

· (less) Expenses incurred in relation to sale

· NET CONSIDERATION

· (less) Cost / Indexed cost of acquisition

· Long term / Short term capital gain

· (less) Exemption u/s 54 of the I.T act

· TAXABLE LONG / SHORT TERM CAPITAL GAIN / LOSS

Ans 1.For E.g the total gain comes 25 lacs then the whole is chargeable to Tax.

2. If the property was held for more than 3 years then it will be treated as long term capital gain at will be charged as 20 percent.

3. Take indexation From the date of transfer from mother to Son to the date of sale date.

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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09 September 2013 4.

PERMISSABLE EXEMPTIONS UNDER CAPITAL GAINS

SECTION 54

Applicability: This exemption can be availed only by individuals or HUF.
Kind of asset: Residential house property or land appertained thereto.

Nature of the asset: The house property is a long term capital asset.

Investments: To be invested in residential house property or deposited in a bank a/c under the Capital gain account scheme.

Amount to be invested: Capital gains

Time limit: Residential house property to be purchased within 1 year before the date of such transfer or within 2 years after the date of transfer OR residential house must be constructed within 3 years after the date of transfer.

Lock In period: The new house property that is acquired should not be sold within 3 years. In case if the property is sold within 3 years then the amount of capital gains that was exempted earlier and the capital gains accruing on the sale of the asset both, will be taxed in the year of receipt of consideration.

Section 54EC

Applicability: This exemption can be availed by anyone.

Kind of asset: Any capital asset

Nature of the asset: The capital asset must be long term.

Investments: To be invested in specified long term capital bonds. Specified long term capital bonds which are redeemable after 3 years are as follows:

Issued on or after April 1st 2000 by REC or by NHAI

Amount to be invested: Capital gains
Time limit: Within 6 months from the date of such transfer

Lock In period: If the specified assets are transferred or converted into money within a period of 3 years then the capital gain arising on the transfer and the earlier exempted capital gain will be clubbed and taxed in the year of the receipt of the consideration

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