Capital gain related help

Hi, You didn't mention the name of the property that is transfered by your mother, but u said it is a long term asset.. The joint flat u purchased is with in one year before the transfer. So, your mother can claim exemption under sec 54f. Exemption wil be under proportionate basis.. Your mother invested 17 lakhs which is below the consideration .ie., 60 lakhs.. So exemption wil be 35 lakhs*17/60= 9.92 lakhs. So taxable amount wil be 35 lakhs minus 9.92 lakhs=25.08 lakhs..

Sory, The calculation is wrong.. Here the new house cost is more than the consideration..

Will there be any Capital gain tax... ?

 

Your mother did had significant amount os money to invest in the property, yet the property was purchased by taking a home loan . Presuming she is eligible for claiming exemption u/s 54 (Kindly refer to the provision) she should invest the entire amount of capital gain , so that she can get exemption

 

Cost of the new property is 62 Lacs

Your contribution is of 45 lacs

That leaves her contribution at 17 lacs

Exemption shall be restricted to 17 Lacs only and she will have to pay tax on 35 lacs - 17 lacs @ 20% (+ cess etc)

 

Due to time constraints I am not citing any case laws, but there are several HC judgement which denies exemption if the money has not been invested by the assessee.

 

It has been presumed that property which your mother owned was a residential house property

If the exemption is to be availed u/s 54F and not S 54 , then note that entire sale consideration should have been invested to cover entire capital gain. 

 

Sale consideration 60 Lac (presuming it to be net sale considertion, after cost of transfer, brokerage etc)

 

ICOA 25 Lacs

 

Cap gain 35 Lacs

 

Exemption 17/60 * 35 lacs =9.9167 Lacs

Taxable = 35 Lacs - 9.9167 lacs = 25.083 Lacs

 

 

Exemption can be claimed u/s 54EC [Bonds of NHAI/RECL] SIMULTANEOUSLY

The same thing I mentioned above.. But the provision is saying that the cost of the new house is morethan the net consideration, then entire capital gain is exempted... There oly the doubt is araisng.. The new flat is 62 lakhs where as net consideration is 60 lakhs.. There is no specific point in relation to proportionate investment.. And again the calculation of capital gain is based on the proportion of cost of new flat..

Hi

Thanks for your quick response. :)

Yes, It is a residential property.

As of now I have only purchased a new property and have not sold the old one.

What If my mother pays another 18 lacs towards the home loan, in that case her contribution will be 35 lacs (and the capital gain is of the same amount)

I am bit confused as someone told me the my mother should be the first owner on the new property in order to get the exemption.

Is it so?

You did'nt take the joint loan... The loan is in your name in its entirety... Your mother can make investment in the property in your name so as to claim exemption.. Cit vs kamal wahal case.. But how can your mother repay your loan?

I have take the home loan jointly.

Is it necessary that my mother should be the first owner on the new property in order to get the exemption?

 

Then surely your mother can claim higher amount of exemption than the amount stated above.. I my view, the co ownership is enough to claim exemption... Nothng is required as first owner I thnk..

Thanks,

Please let me know how much home loan shall I repay for this?

Originally posted by : mahendra
	The same thing I mentioned above.. But the provision is saying that the cost of the new house is morethan the net consideration, then entire capital gain is exempted... There oly the doubt is araisng.. The new flat is 62 lakhs where as net consideration is 60 lakhs.. There is no specific point in relation to proportionate investment.. And again the calculation of capital gain is based on the proportion of cost of new flat..

 

I was talking in respect of S. 54 and related issues but while replying I forgot that you already answered with reference to 54F , so there was a redundancy (I even did calculation :(  )

 

That point, S.54F(1)a

If the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 

 

This would be applicable when assessee has himself made the investment from his own sources.

 

Note that there have been judgement wherein exemption has been denid if the assessee used the borrowed money, instead of utilizing the funds from sale of assets, for the purpose of investment.

Due to timing constraints am not citing any case laws, but I assure you of the facts . 

(I can cite the cases later (after Aug) if required)

 

@ Anupam

Mr. Mahendra has rightly pointed out that your mother only needs to be a co-applicant, she does not need to be the 1st owner AT ALL. He has even cited a case law for this and there are several other High court judgement supporting this view.

 

 

Your mother MUST repay the loan to the extent of capital gain i.e 35 Lacs , this way there shall be no tax.

A big thanks to both of you for your valuable time :)

One more thing regarding the old property.

It was constructed in year 2000, and the money invested was about 7 lacs, but I dont have any receipts to support that. Will this be ok? 

How will I claim benefits on this one using the indexaton?

This would be applicable when assessee has himself made the investment from his own sources. � Note that there have been judgement wherein exemption has been denid if the assessee used the borrowed money, instead of utilizing the funds from sale of assets, for the purpose of investment. Due to timing constraints am not citing any case laws, but I assure you of the facts .� I have verified the case law in respect of investment only out of sale proceeds... It is nt necesary that sale consideration shuld be utilised for the investment purpose. We can invest oup of borowd funds and also frm other sources.. Exemption cannot be denied. Check the case law of cit vs m.vasudevan chettiar.

There are contrary judgements. If there is a safe way avoiding all litigation then we should prefer that na. I respect your knowledge

 

@ Anupam

Supporting is essential, you can not claim the benefit without the bills