19 May 2010
A couple owns house jointly in India. Both of them are now settled abroad and one of them is Resident and other is Non-Resident.
They have decided to sell the house. The amount of consideration expected is Rs.6000000/- to Rs.6500000/-. The house was constructed during 1996 to 1998 at total cost of Rs.3000000/-.
What are the implications for income tax?
Can exemption u/s 54 of the I.T. Act be claimed in respect of house purchased/to be purchased abroad?
Can exemption be claimed by purchasing house in India?
Can benefit of section 54EC be claimed?
How the funds can be remitted abroad?
Kindly advise procedure.
Is there any liability u/s 195 of the I.T. Act, 1961?
The assessee is ready to deposit advance tax in respect of Long Term Capital Gain if required if benefits are not available u/s 54 or 54EC.
Kindly also favour with guidance on any other connected point.
Non resident PIO (Person of Indian Origion) can buy and sell property in India without taking any permission from RBI.(They cann't buy agricultural land, farm house). As by selling house property in India, income is arising or accuring in India, they will have to pay tax under capital gain provisions, in India. They can reinvest the gain money in house property in India only to get deduction u/s 54. Based on the facts of the problem, i do not see any liability u/s 195
21 May 2010
Section 54 of the I T Act is providing exemption from taxation on the amount of long term capital gains arising out of sale of residential house if amount of gains are applied with stipulated time period in buying/constructing another residential house. Section 54EC provides exemption from taxation on the amount of long term capital gains arising out of sale of any kind of capital asset if amount of gains areinvested in specified asstes namely bonds issued by NHAI or REC (at present) Both these exemption provisions are not mututally exclusive provisions , that is, there is nothing in the provisions u/s 54 or 54EC which states that one can not avail of both the exemption. Further wordfing of provisions itself shows that the law makers have enacted the provisions as additional incentives . That is the reason , the provision constains word ” whole or any part of it , which means that it was not necessary that full amount of capital gains should have been used for buying the “Specified Assets”. Read extract of section 54EC below 54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,
If the Law makers had the intention of not giving the simultaneous exemption u/s 54 & 54EC, it could have been written in the provision itself similar to the provision in Section 54EC which mentions that investmnt in specified asset will not be taken in to account for rebate u/s80C or 88 if the same is considered for the exemption u/s 54 EC. Read the extract below (3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),
(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006; (b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006. For aforesaid reasons , in my opinion, there is no such restriction about claiming of exemption u/s 54 or 54F simultaneously with section 54EC.
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