Long Term Capital Gains impact on Sale of a house

Tax queries 2102 views 4 replies

MG

28 Points Posted on 14 July 2010

Hello,

Long Term Capital Gains impact on Sale of a house.

I am an NRI. I bought a house on 10 june 2004 and will sell that house on 26 JULY 2010 or August 2010. I paid stamp duty and brokerage charge when i purchased the house.

1) How do i find out cost inflation index for 2010?
2) How to determine calculate Capital Gains?
3) Shall i deduct the expenses amount (stamp duty + brokerage cost) paid during the time of purchase on Capital gain?
4) To avoid the capital gains one has to invest in another property   or invest in capital gains account scheme or specified bonds.
      When should this be done? Whether it should be before filing the return 31/7/ 2010 if we sell the house on 26 July 2010 or August 2010
            or
      Whether it should be within 6 months from the date of sale?.
5) If it is within 6 months from the date of sale then what should the return filed on 31/7/2010 contain regarding Capital gains?
6) Shall i invest in agriculture land? IF yes, how long i have to keep that agriculture land to avail long term capital gain tax exemption? When can i resale the agriculture land? Is it allowable to convert the agriculture land as a plot and resale it?
7) Shall i buy the property (agriculture land or plot or flat) in my wife name?
8) Shall i buy the house or flat in my name to avail Long term capital gain exemption even if i have another house in my name?
9) I will get a sale proceed amount as Demand draft when i sale the house. I can't immediatly invest the
money to purchase a house until i find a good property. So I am thinking to doposit the demand draft in my regular savings account for collection. Because it will take atleast a year to find&purchase a good property. Till the time amount is not utilised for purchase/construction i can open a "Capital Gains Account Scheme, 1988" in nationlized bank and issue a cheque from my regular savings account for that total sale proceed amount and deposit that check in "Capital Gains Account Scheme, 1988" account.

    a) Is it right approach?
    b) IF NOT do i have to deposit the demand draft which i will get as a sale proceed amount from the buyer in this "Capital Gains Account Scheme, 1988" account?
   c) When should i deposit the sale proceed amount in "Capital Gains Account Scheme, 1988"? Is it before the due date of furnishing return of income? Is it 31-JULY-2010 or 31-JULY-2011 or within 6 months from sale date?
   d) Do i have to deposit only Capital GAIN AMOUNT or entire sale proceed amount in "Capital Gains Account Scheme, 1988"?
   e) Can NRI open "Capital Gains Account Scheme, 1988" account?

Your earliest reply will be appreciated.

Thanks

Replies (4)

Amir

Learner

4016 Points Posted on 15 July 2010

Dear Sir,

Answer - 1- Inflation indices are notified by the department -For FY 2004-05 it is 480 , and I don't think till now Department has come up with the index for FY 2010-11 (Please confirm) , so we have to wait...

Answer 2 Calculation -

Sale Price = xxxxxxx

Less : -Indexed Cost of Acquisition = (xxxxxx) multiply with Index for FY 10-11and divide with 480

Less: - Indexed Cost of Improvement = (xxxxxx) multiply with Index for FY 10-11and divide with the index for the year in which improvement was done.

Less: - Expenses on Selling like stamp charges, brokerage, commission, etc

Answer 3- Stamp duty brokerage paid at the time of purchase shall be the part of Cost of acquisition

Answer 4 - Tax saving -

Buying a new property - within 2 years from the date of sale

Constructing a new property - Within 3 years from the date of sale

Till that time amount of gain should be deposited in a Capital Gain a/c scheme (from which u can withdraw later on) before the due date of filing return of Income (most likely it will be 31st July 2011 in ur case as I am supposing that u r not carrying on any business in India the books of which are required to be audited)

Investment in Bonds - It should be within 6 months from the date of sale (i:e Feb 2011 in ur case) & option to park ur funds in Capital gain a/c scheme for the meantime is not available in this case.

Answer 5 - I did not understand what exactly u have asked in this but the due date of filing ur return cannot will not undergo any change.

Answer to question 6 & 7 have already been given in one of ur earlier posts.

Answer 8 -Having another House property in ur name is not a hurdle before claiming this exemption.

Answer 9 - I am not sure but I don't see any problem in parking the funds in regular account pending the opening of CGA {Capital Gain Account} provided the same are transfered to CGA before the due date of filing return i:e 31.07.2011

However in order to be on a safer side I would advice you to act in advance and open an account before depositing the amount in the regular aacount.

Law requires you to keep the amount of CAPITAL GAIN in the CAG Scheme but I don't think you will be getting two cheques- one for Cost & another for gain........:)

Yes, NRI can open CGA.

Enjoy the like -

https://www.mumbaipropertyexchange.com/investments/Articles.aspx?id=37

CA Ashish Joshi

265 Points Posted on 15 July 2010

I am completly agrre with Amir............For geting capital gain to be untaxed in AY 2009-10 you have to deposit the amount to the Capital gain tax Scheme before filling the tax return. Thanks++++++++++++++++Ashish

Juzer Sadikot

CA - innovative solutions for Imports an

1309 Points Posted on 16 July 2010

Hello Gents,

Mr. Amir has very nicely responded to all your query.

In relation to your query no 9, you are allowed to park the sales proceeds to your NRO Saving Accounts.

I would like to ask you two quick question:

1) Have you purchased any residential property on or after August 2009 in/outside India?

2) Have you made any payment as booking/installment for under construction residential property possession of which is likely to be given on or before July 2012?

If answer to either of the above question is "yes" then there are chances to avoid/minimize the amount to be deposited in CGAS.

B Regards

Juzer