Long term capital gains on sale of house

Tax queries 892 views 4 replies

Ninad

Service

52 Points Joined October 2008

My friends mother a widow sold a house on 22 march 2010.

This house was built on land acquired in 1955-60( tentatively-date is not known). Pieces of land were acquired at that time by many individuals so that they could build row houses and form a society. Unfortunately the said land pieces went under litigation and eventually this litigation continued till now. Some members although fought it out and finally the 3rd-4th generation enjoys the benefit where in the dispute came to end and the row houses were built.

The said land was purchased by my friends grandfather and transferred after his death to his son and then to his wife.

Now he ha sold the property on the above date

Questions

1. How to determine cost of acquisition in order to calculate Capital Gains.

2. 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 i.e 31/7/ 2010

Whether it should be within 6 months from the date of sale.

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

She is a senior citizenand has only interest income

Thanks

Ninad

Replies (4)

mukesh

Service

27 Points Joined October 2008

From your query I understand that the property in question was transferred to the assessee by way of will/inheritance. My reply is based on this assumption.

1. The cost of acquisition would depend on whether the property was transferred before April 1, 1981 or after April 1, 1981.

Before April 1, 1981 - COA shall be cost to previous owner of Fair market value as on April 1, 1981 whichever is higher.

After April 1, 1981 - COA to the previous owner.

However in both the cases you will get indexation benifits.

2. The Capital gain shall be exempt if the assessee has purchased a residential house within 1 year before the transfer or constructed within a period of 3 years after the date of transfer. Till the time the amount is not utilised for purchase/construction, it can be deposited in any Public Sector Bank under Capital Gains Account Scheme, 1988 before the due date of furnishing the return of income i.e., 31st july and not within 6 months.

Hope this clarifies.

Rgds...Mukesh

Originally posted by : Ninad

Hi

My friends mother a widow sold a house on 22 march 2010.

This house was built on land acquired in 1955-60( tentatively-date is not known). Pieces of land were acquired at that time by many individuals so that they could build row houses and form a society. Unfortunately the said land pieces went under litigation and eventually this litigation continued till now. Some members although fought it out and finally the 3rd-4th generation enjoys the benefit where in the dispute came to end and the row houses were built.

The said land was purchased by my friends grandfather and transferred after his death to his son and then to his wife.

Now he ha sold the property on the above date

Questions

1. How to determine cost of acquisition in order to calculate Capital Gains.

2. 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 i.e 31/7/ 2010

or

Whether it should be within 6 months from the date of sale.

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

She is a senior citizenand has only interest income

Thanks

Ninad

Ninad

Service

52 Points Joined October 2008

Thanks for the prompt reply

1. To calculate the Fair market value is the services of a valuer required

2. What about bonds Section 54EC which states that within 6 months of the date of the transfer the capital gains to be invested in REC/NHAI bonds and no withdrawal is allowed for 3 years

3. As per your reply all transactions for saving LTCG tax should be done before 31/7 i.e the due date of filing the return. Am I right in saying this

4. Can the amount paid as professional services for a tax consultant/valuer be claimed as a deduction in calculating LTCG

Thanks

Ninad

mukesh

Service

27 Points Joined October 2008

It is not mandatory to refer to the valuer. You can do so if you cannot determine the value by yourselves. Otherwise you can refer the circle/area rate of the property on 01-04-1981. The AO may refer to the valuation officer at the time of assessment if he feels that the FMV claimed is higher than the actual FMV.

Yes you are right. You can also invest in bonds of REH/NHAI within 6 months from the date of transfer and it has a lock in period of 3 years.

Rgds...Mukesh

Chinnappan D M

Consultant

96 Points Joined September 2008

I have sold a house property acquired in 1980 from staff housing loan. I have added additional rooms and floors to the house during last 30 years. After indexation I have a LTCG of 55 lacs.The property is in my name and now I want to invest in buying new flat to avoid LTCG. The questions are

Can I buy the new flat in the joint names of myself and my wife?

I am 62 years old is there any additional exemption for the senior citizen?

I sold the property in July 2010. Should I take the CII value for the AY 2010-11 which is normally notified in September 2010 or should I take only the already announced index value in Sep 2009?

Can I buy two house properties one with my wife and another with my children?

Can anyone please clarify.