calculation of capital gain on land

ltcg at 20%...

Assessees have an option to compute LTCG on transfer of Listed Securities either with indexation or without indexation and accordingly pay tax at 20% or 10% .

Hello, Mandar

On the basis of the heading of the querry, I think u r querry is regarding cap. gain on Land.

Now, if the assessee doesn't want avail the benifit under section 54EC or any other related section, then;

1) if Cap. gain is STCG, then it will be treated and included as normal income in Net Total Income and slabwise tax has to be calculated.

2) if cap. gain is LTCG, then tax @ 20% flat rate is to be paid. However, if the assessee has no other income or has less income than basic exemption limit, then the remaining amt. of basic exemption limit (i.e. basic exemption limit Less Net Total Income other than LTCG) will be reduced from LTCG and on remaining amt. of LTCG, tax @ 20% flat rate has to be paid.

Sec. 54EC says the asset transferred is a Long Term Capital Asset. So, it can be land or securities.

Capital Gains not chargeable on investment in certain bonds [Section 54EC]
This section provides that the capital gain arising from transfer of a long-term capital asset
shall be exempt from tax if such capital gain is invested in a long-term specified asset within 6 months after the date of such transfer. If part of the capital gain is so invested, proportionate exemption will be available, such that so much of the capital gain as bears to the whole capital gain the same proportion as the cost of the long-term specified asset bears to the whole of the capital gains, shall not be charged under section 45.
For this purpose, “long term specified asset” means any bond, redeemable after three years
and issued on or after 1st April, 2006

(i) by the National Highways Authority of India (NHAI) or
(iii) by the Rural Electrification Corporation Limited (RECL).
For the purpose of this section, "cost of long-term specified asset" means the amount invested
in such specified asset out of capital gains arising from the transfer of the original asset.
This exemption is subject to the conditions that the long-term specified asset is held for a
minimum of three years from the date of its acquisition. Where such specified asset is
transferred or converted (otherwise than by transfer) into money at any time within such
period, the exemption claimed earlier under this section will be deemed to be income
chargeable to tax under the head "Capital gains" of the previous year in which such long-term
specified asset is transferred or converted.
It is further provided that where the assessee takes any loan or advance on the security of
such long-term specified asset, he shall be deemed to have converted such asset into money
on the date on which such loan or advance is taken. Further, where the exemption from
capital gain is availed of in respect of investment on long term specified asset, deduction from the income with reference to such cost will not be available under section 80C.

my client has sold a house and purchase a new house against the same for save the ltcg. can he sold the new house before 3 years, can he avail the the ltcg benefit he has taken of earlier house?

Is your client an individual. If Yes, Section 54 applies.

Conditions:

1. Residential House to be trasferred.

2. It must be a Long Term Capital Asset.

3. The income from such asset is chargeable under the head, Income form House Property.

4. Within 1 yr. before or 2 yrs. after the date of transfer, a residential house is purchased or within a period of 3 Yrs. after the date of transfer, a residential house is constructed.

Quantum of exemption:

If the cost of the new residential house is greater than capital gain then the whole of the capital gain. Otherwise to the extent of the cost of the new residential house.

Violation:

U/s 54 where new asset is required to be acquiredand if the new asset is transferred within a period of 3 Yrs. from the date of its acquisition, the cost of such asset shall be reduced by the amount of capital gain exempted earlier and STCG shall be computed after deducting such reduced cost of acquisition.

Agree with Deepika's reply

biren- 1) ur client can claim exempn u/s 54 wen he purchases the new house n taxable cap gains wud b ones as reduced by such exemption, @ 20%

2)f ur client sells the newly acquired house within 3 years from date of acqn. the gains exempted earlier u/s 54 on the purchas of dat new house would b taxable as stcg in the year of its transfer n taxable @ 30%

so sir,it would b advisabl not to claim exempn u/s 54 on account of purchase of the new house cz of 2 rzns:

a) if exempn claimed, then tax on ltcg @ 20% would b levied on a lesser amt(ltcg-exempn)

b) n wen cap gains exempted earlier r made taxable in the year of transfer of that new house, they would b charged at a higher rate of 30%+shec&ec 3%

hi mander

your client can go in for deposit in capital gains scheme account(very easy to open in nationalised banks) and then go in to purchase a house within 3 yrs from the sale or construct within 2 years.

Else he will have to cough out tax ltcg @ 20% after indexation subject to maximum amount not chargeable to tax or stcg to be added to his income.

Also since in the coming years taxation slabs are going to be higher so your client will have to cough out lesser amount as taxes compared to now.