House property query

Tax queries 647 views 4 replies

deepak

C.A & C.S Final

63 Points Joined June 2011

A Joint-Family stays in a bunglow.

They mutually decided to sell the Bunglow.Suppose the Sale Consideration is Rs 5 Crore.

By calculatiny the Indexation Cost of Accquistion and Improvement, Income From Capital Gains comes to almost Rs50 Lacs.

Now the query is that after selling the Bunglow ,they decided to construct another Bunglow and the constuction will be completed within 3 years.

So the query is that whether the Karta needs to pay "Income from Capital Gain on Rs 50 Lacs or not,beacuse apart from the Bunglow ,the Karta is owing 3 more flats but he is not investing ( to be more precise "CONSTRUCTING") that Rs 50 Lacs in this 3 Premises which he is owing.

(Note : The Bunglow which was sold ,was also registered under the name of "KARTA", and the new Binglow where consruction is carrying on ,will also be under the name of "Karta" itself)

Replies (4)

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

The property belong to the individual and not of HUF, so all tax treatments are to be laid in hands of individual capacity of karta only.

he needs to deposit 50 lacs in capital gain account and pay tax on 4 cr, or invest the 4 /4.5cr before the due date of filing return of respective year.

CA Neil Ganatra

Partner - Gautam Joshi & Co.

871 Points Joined February 2009

Here following options are available.

1. Either new residential house property should be purchased. If the cost of it is more than or equal to Rs. 50 lacs which the capital gain in your case then nothing will be chargable. This exemption is available u/s 54.

2. The assessee can invest Rs. 50 lacs per F.Y. in bonds mentioned in Sec. 54EC to cover whole capital gain amount and can claim exemption u/s 54EC. However he can not sell thos bonds for the 3 years.

3. If house is purchased but its cost does not cover whole capital gain then invest remaining amount of capital gain in bonds and claim exemption under sec. 54 and 54EC both,

deepak

C.A & C.S Final

63 Points Joined June 2011

Sir can u please elaborate ur sentence

"pay tax on 4 cr, or invest the 4 /4.5cr before the due date of filing return of respective year."

Karan Malhotra

Auditor

66 Points Joined January 2011

Dear deepak,

As per my opinion, you should disclose the capital gain in the hands of karta(in his individual capcity) and claim the exemption under section 54 because (Unlike section 54F), this section does'nt make any limit on the no of houses that would be owned by the assessee, Thus, that means assessee can own any no of houses.

I think u shud disclose ur facts in the foll way:

1. Karta(In his individual capacity) owns a property which he wishes to sell.

2. karta (In his individual capacity) will construct the property and claim the exemption.

Pl inform me why you want to show the property/bunglow as a joint property becaz may be after that my opinion wud be changed.