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Long term capital gain.

vijayakumar (proprietor) (172 Points)

28 December 2017

Sir I bought an Agricultural land in 2007 for 5 lacs. Now it is in city limits. There is a buyer for 120 lacs . How much I have pay the capital gains tax. or if I invest all the money in Govt bond can I avoid tax. ? if tax paying is not avoidable , then can I invest the rest of money in mutual funds? I am a house wife & having no income now.. what is hthe best option?

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7 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195608 Points)
Replied 28 December 2017

There would be about 110 lakhs LTCG, which can be invested as 50 lakhs in 54EC bond and about 65 lakhs in a house property u/s. 54F for nil tax liability. ( both the invetment for 3 years)

vijayakumar (proprietor) (172 Points)
Replied 28 December 2017

Sir,

Thank you. thank you very much. She is already having one flat in a joint name ( earlier she sold a plot & bought a flat in a joint name with her son who is working. So can she buy another flat even using all the proceeds? She wants to purchase a flat which costs 130 lacs. . can she join with her husbund for the short fall & buy the flat ? Thank you. thank you.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195608 Points)
Replied 28 December 2017

Yes, She can buy second flat from the sale proceeds of the plot.

It will be exempted u/s. 54F........... where main condition is she should not have more than ONE flat other than the one being bought.

Good luck.......

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195608 Points)
Replied 28 December 2017

Section - 54F, Income-tax Act, 1961 - FA, 2017

Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.

54F. (1)[Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—

(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 ;
(b)		if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

[Provided that nothing contained in this sub-section shall apply where—

(a)

the assessee,—

(i)		Owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii)		purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii)		constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b)

the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".]

vijayakumar (proprietor) (172 Points)
Replied 28 December 2017

Sir, Thank you very much. This means she will treat the proceeds of the sale as in come , pay the tax ( approx 31 to 33 % of the receipt), balance money she

can buy a flat.

Kindly confirm sir.

Thank you so much.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195608 Points)
Replied 28 December 2017

Only restriction to the purchase of new house property is the time gap of the purchase of earlier flat and second flat. (check conditions (a) (ii) and (iii))

In short, if it was purchased for more than 3 years before..... no restriction.......

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195608 Points)
Replied 28 December 2017

For your clarification, when she invests total sale procceds of plot, i.e. 120 lakhs in new house property, there would not be any tax liability at all (subject to the conditions as specified above)