Capital gain tax
This query is : Resolved
18 May 2017
i had purchased property in year 2010 for 8 lacs and sold in 2014 @ 28 lacs it was invested in capital gain and now i purchased new property in 2016 for 53 lacs in myself/father & mother name. now if i sell today at same purchase price of rs. 53 lacs.there will be any tax liabilty. pls advise
18 July 2024
Based on the details provided, let's analyze the tax implications regarding your property transactions:
### Calculation of Capital Gain:
1. **First Property (Sold in 2014):**
- Purchase Price (in 2010): Rs. 8,00,000
- Sale Price (in 2014): Rs. 28,00,000
**Capital Gain:**
- Capital Gain = Sale Price - Purchase Price
- Capital Gain = Rs. 28,00,000 - Rs. 8,00,000
- Capital Gain = Rs. 20,00,000
2. **Utilization of Capital Gain:**
- You mentioned that the capital gain from the sale of the first property was invested in a new property purchased in 2016 for Rs. 53,00,000 in your and your parents' names.
3. **Current Situation:**
- If you sell the current property (purchased in 2016 for Rs. 53,00,000) today at the same purchase price of Rs. 53,00,000, there will generally be no capital gain because the sale price equals the purchase price.
### Tax Liability:
- **Long-Term Capital Gains (LTCG):**
- The property purchased in 2010 and sold in 2014 qualifies as a long-term capital asset since it was held for more than 3 years.
- LTCG is taxed at a rate of 20% with indexation benefit. However, you mentioned that the entire capital gain was invested in a new property within the specified time frame under Section 54 of the Income Tax Act.
- **Exemption under Section 54:**
- Section 54 provides exemption from LTCG tax if the entire capital gain amount is reinvested in another residential property within specified time frames (either 1 year before or 2 years after the sale of the property, or within 3 years for construction).
- Since you reinvested the entire capital gain amount into the new property in 2016, you should be eligible for full exemption from LTCG tax on the property sold in 2014.
- **Current Property (Purchased in 2016):**
- If you sell the current property today at the same purchase price of Rs. 53,00,000, there would be no capital gain. Hence, there would be no tax liability arising from this sale.
### Conclusion:
Based on the information provided, if you sell the current property today at the same purchase price of Rs. 53,00,000, there will be no tax liability because there is no capital gain to be taxed. Moreover, the capital gain from the property sold in 2014 was already reinvested in the new property purchased in 2016, resulting in exemption under Section 54 of the Income Tax Act. Always ensure to consult with a tax advisor or chartered accountant for personalized advice based on your specific financial situation and current tax laws.
### Calculation of Capital Gain:
1. **First Property (Sold in 2014):**
- Purchase Price (in 2010): Rs. 8,00,000
- Sale Price (in 2014): Rs. 28,00,000
**Capital Gain:**
- Capital Gain = Sale Price - Purchase Price
- Capital Gain = Rs. 28,00,000 - Rs. 8,00,000
- Capital Gain = Rs. 20,00,000
2. **Utilization of Capital Gain:**
- You mentioned that the capital gain from the sale of the first property was invested in a new property purchased in 2016 for Rs. 53,00,000 in your and your parents' names.
3. **Current Situation:**
- If you sell the current property (purchased in 2016 for Rs. 53,00,000) today at the same purchase price of Rs. 53,00,000, there will generally be no capital gain because the sale price equals the purchase price.
### Tax Liability:
- **Long-Term Capital Gains (LTCG):**
- The property purchased in 2010 and sold in 2014 qualifies as a long-term capital asset since it was held for more than 3 years.
- LTCG is taxed at a rate of 20% with indexation benefit. However, you mentioned that the entire capital gain was invested in a new property within the specified time frame under Section 54 of the Income Tax Act.
- **Exemption under Section 54:**
- Section 54 provides exemption from LTCG tax if the entire capital gain amount is reinvested in another residential property within specified time frames (either 1 year before or 2 years after the sale of the property, or within 3 years for construction).
- Since you reinvested the entire capital gain amount into the new property in 2016, you should be eligible for full exemption from LTCG tax on the property sold in 2014.
- **Current Property (Purchased in 2016):**
- If you sell the current property today at the same purchase price of Rs. 53,00,000, there would be no capital gain. Hence, there would be no tax liability arising from this sale.
### Conclusion:
Based on the information provided, if you sell the current property today at the same purchase price of Rs. 53,00,000, there will be no tax liability because there is no capital gain to be taxed. Moreover, the capital gain from the property sold in 2014 was already reinvested in the new property purchased in 2016, resulting in exemption under Section 54 of the Income Tax Act. Always ensure to consult with a tax advisor or chartered accountant for personalized advice based on your specific financial situation and current tax laws.
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