Long term capital gain
This query is : Resolved
11 February 2013
Assessee has entered into the land development agreement that he will sold land for Rs. 2,00,00,000.
but he will receive consideration of rs. 50,00,000.and he will get 1 flat in constructed building by builder. how an assessee can claim deduction and under which section ?
but he will receive consideration of rs. 50,00,000.and he will get 1 flat in constructed building by builder. how an assessee can claim deduction and under which section ?
11 February 2013
As the proceeds of Capital Asset transferred is being invested in a residential House
(Condition of not more than 1 house to be adhered to) Exemption U/s 54F can be claimed. Here 75 % sales consideration amount has been invested in the Flat so 75% Capital Gain will be exempt and 25% will be taxable.
.
(Condition of not more than 1 house to be adhered to) Exemption U/s 54F can be claimed. Here 75 % sales consideration amount has been invested in the Flat so 75% Capital Gain will be exempt and 25% will be taxable.
.
12 February 2013
Thanks Sir But, if the land is held by whole family, should it show as HUF OR Personally in the name of family members ? to save tax!
03 August 2024
### Long Term Capital Gain (LTCG) from Land Development Agreement
When an assessee enters into a land development agreement where they receive part cash consideration and part in kind (such as a flat), the taxation and deductions related to Long Term Capital Gain (LTCG) will follow these principles:
#### Tax Treatment of LTCG
1. **Determining Capital Gain**:
- **Sale Consideration**: The total consideration for the land will be considered for calculating LTCG. In this case, it's ₹2,00,00,000.
- **Receipt in Cash and Kind**: The total consideration is divided into ₹50,00,000 in cash and a flat. The fair market value (FMV) of the flat at the time of transfer needs to be considered. For calculating LTCG, both cash and kind are considered.
2. **Calculation of LTCG**:
- **Sale Price**: ₹2,00,00,000 (includes ₹50,00,000 in cash and the FMV of the flat).
- **Cost of Acquisition**: The cost of acquiring the land needs to be deducted from the sale price to calculate LTCG.
- **Indexation**: Indexation benefit can be claimed if the land is held for more than 36 months, adjusting the cost of acquisition for inflation.
3. **Deductions and Exemptions**:
- **Section 54F**: If the assessee invests the proceeds from the sale of the land into a new residential property, they can claim exemption under Section 54F of the Income Tax Act. The exemption is available if the assessee does not own more than one residential house other than the new residential house on the date of transfer of the original asset.
- **Section 54EC**: If the proceeds are invested in specified bonds (such as NHAI or REC bonds) within 6 months, exemption under Section 54EC can be claimed. However, this is applicable only to the cash consideration.
4. **Flat Consideration**:
- The FMV of the flat received needs to be included in the total consideration for calculating capital gains.
- The cost of the flat is not directly deductible but affects the overall capital gain calculation.
### HUF vs. Individual
- **Taxation in Individual Name vs. HUF**:
- If the land is held in the name of individual family members, each member's share will be considered for calculating capital gains individually. The family members can claim deductions and exemptions separately based on their respective shares.
- If the land is held in the name of an HUF (Hindu Undivided Family), then the HUF will be responsible for the tax on capital gains. The tax treatment and exemptions would follow the same principles as for an individual.
### Considerations for Holding in HUF
1. **HUF Benefits**:
- **Separate Taxation**: HUF is treated as a separate entity for taxation. If land is held by an HUF, the capital gains will be taxed in the hands of the HUF, which may provide tax planning opportunities.
- **Distribution**: HUF's income can be distributed among members, potentially lowering the overall tax liability if members are in lower tax brackets.
2. **Family Members**:
- If the land is owned personally by family members, each member will need to report their share of capital gains separately. This might result in higher tax liability if not managed correctly.
### Summary
- **For LTCG Calculation**: The total sale consideration, including both cash and the FMV of the flat, should be used. Deductions under Sections 54F or 54EC can be claimed as applicable.
- **HUF vs. Individual**: The decision to hold the land as an HUF or individually affects the tax treatment and planning. Holding as an HUF can be beneficial for separate taxation and potential distribution among family members.
**Consult a tax advisor** to get detailed guidance specific to your situation and to ensure compliance with tax regulations.
When an assessee enters into a land development agreement where they receive part cash consideration and part in kind (such as a flat), the taxation and deductions related to Long Term Capital Gain (LTCG) will follow these principles:
#### Tax Treatment of LTCG
1. **Determining Capital Gain**:
- **Sale Consideration**: The total consideration for the land will be considered for calculating LTCG. In this case, it's ₹2,00,00,000.
- **Receipt in Cash and Kind**: The total consideration is divided into ₹50,00,000 in cash and a flat. The fair market value (FMV) of the flat at the time of transfer needs to be considered. For calculating LTCG, both cash and kind are considered.
2. **Calculation of LTCG**:
- **Sale Price**: ₹2,00,00,000 (includes ₹50,00,000 in cash and the FMV of the flat).
- **Cost of Acquisition**: The cost of acquiring the land needs to be deducted from the sale price to calculate LTCG.
- **Indexation**: Indexation benefit can be claimed if the land is held for more than 36 months, adjusting the cost of acquisition for inflation.
3. **Deductions and Exemptions**:
- **Section 54F**: If the assessee invests the proceeds from the sale of the land into a new residential property, they can claim exemption under Section 54F of the Income Tax Act. The exemption is available if the assessee does not own more than one residential house other than the new residential house on the date of transfer of the original asset.
- **Section 54EC**: If the proceeds are invested in specified bonds (such as NHAI or REC bonds) within 6 months, exemption under Section 54EC can be claimed. However, this is applicable only to the cash consideration.
4. **Flat Consideration**:
- The FMV of the flat received needs to be included in the total consideration for calculating capital gains.
- The cost of the flat is not directly deductible but affects the overall capital gain calculation.
### HUF vs. Individual
- **Taxation in Individual Name vs. HUF**:
- If the land is held in the name of individual family members, each member's share will be considered for calculating capital gains individually. The family members can claim deductions and exemptions separately based on their respective shares.
- If the land is held in the name of an HUF (Hindu Undivided Family), then the HUF will be responsible for the tax on capital gains. The tax treatment and exemptions would follow the same principles as for an individual.
### Considerations for Holding in HUF
1. **HUF Benefits**:
- **Separate Taxation**: HUF is treated as a separate entity for taxation. If land is held by an HUF, the capital gains will be taxed in the hands of the HUF, which may provide tax planning opportunities.
- **Distribution**: HUF's income can be distributed among members, potentially lowering the overall tax liability if members are in lower tax brackets.
2. **Family Members**:
- If the land is owned personally by family members, each member will need to report their share of capital gains separately. This might result in higher tax liability if not managed correctly.
### Summary
- **For LTCG Calculation**: The total sale consideration, including both cash and the FMV of the flat, should be used. Deductions under Sections 54F or 54EC can be claimed as applicable.
- **HUF vs. Individual**: The decision to hold the land as an HUF or individually affects the tax treatment and planning. Holding as an HUF can be beneficial for separate taxation and potential distribution among family members.
**Consult a tax advisor** to get detailed guidance specific to your situation and to ensure compliance with tax regulations.
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