Long term capital gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 April 2014 Hi all,

I Have the following query; I just want the query to be solved urgently. Thanks in Advance.

A has a Individual house worth Rs.1.60 Crore. He has entered in to Joint Venture(50% and Rs.20,00,000 in Cash or Bank Transfer). He is planning to Get 3 Flats, one flat in the name of his wife and other flats is in the name of his daughters.

Whether he will be liable for Capital Gain tax? Whether Tax is on Rs. 20,00,000.

Whether he can claim exemption under Sec 223 Relief 0n disposal of private residence? As he is the Sole owner and he is residing there. And he has only one property. Else on what amount he is liable to pay capital gain?

What are the process to be followed in case he can claim exemption?

Kindly Advise. Very urgent.

Thanks

Querist : Anonymous

Querist : Anonymous (Querist)

18 April 2014 Yes, the assessee will be liable for capital gain tax. However 3 flats can be considered as one residential unit under Section 54.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2024 Certainly! Let's break down the capital gains implications and exemptions in the scenario where individual A is entering into a joint venture and receiving flats in exchange for his property:

### **1. **Capital Gain Tax Liability**

**Calculation of Capital Gain**:

1. **Determine the Sale Consideration**:
- **Value of Property Received**: This includes the fair market value (FMV) of the 3 flats received plus the cash amount.
- **Value of Property Transferred**: Rs. 1.60 Crore (as per your statement).

Assuming the FMV of the 3 flats is collectively worth Rs. X, the total sale consideration is:
\[ \text{Total Sale Consideration} = X + 20,00,000 \]

2. **Calculate Capital Gain**:
- **Capital Gain** = Total Sale Consideration - Cost of Acquisition.

If the cost of acquisition (including indexation, if applicable) is Y, then:
\[ \text{Capital Gain} = (X + 20,00,000) - Y \]

### **2. **Tax on Rs. 20,00,000**

The Rs. 20,00,000 received in cash is part of the total sale consideration and will be subject to capital gains tax as part of the overall gain calculated.

### **3. **Exemption under Section 54/54F**

**Section 54**: Allows exemption if the capital gain is invested in a residential property.

**Section 54F**: Allows exemption if the entire sale consideration is invested in a residential property.

In this case:

- **Claiming Exemption**: A can claim exemption under **Section 54** provided:
- The gain is invested in a residential property.
- If the three flats are considered a single residential property (which may be a matter of interpretation based on facts), he could claim the exemption.

- **Residential Property Requirement**:
- Since the flats are in the name of his wife and daughters, and if A is not directly investing the capital gain in the flats, it may affect eligibility for exemption.

### **4. **Process for Claiming Exemption**

1. **Investment in New Property**: Ensure that the investment made in the new property qualifies for exemption under Section 54 or 54F.

2. **Filing of Income Tax Return**: The exemption should be claimed while filing the income tax return for the relevant financial year. You need to provide details of the new property acquired and the capital gain calculation.

3. **Supporting Documents**: Maintain documentation for:
- The fair market value of the flats.
- Evidence of investment (e.g., bank statements, property agreements).
- Proof of residence and ownership.

4. **Proof of Exemption**: Submit necessary documents to the tax authorities to substantiate the claim of exemption under the relevant section.

### **Summary**

- **Capital Gain Tax**: Applicable on the total consideration (FMV of flats + cash) minus the cost of acquisition.
- **Exemption**: Claim under Section 54 or 54F if eligible. Ensure that the investment meets the criteria.
- **Process**: File the exemption claim with the income tax return and provide necessary documentation.

**Note**: It is highly advisable to consult a tax professional or a chartered accountant to ensure compliance with the tax laws and accurate calculation and filing.

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