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Property related

06 August 2021

Please clarify the process of selling ancestral property and receiving money through bank with IT terms to avoid any dispute related to income tax.

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4 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 06 August 2021

Capital gains will arise and take payment through bank

Mahesh Shah (2299 Points)
Replied 06 August 2021

1) first of all, check if property is acquired prior to 2000
2) if property is acquired prior to 2000, then get valuation report, by incomtax registered valuer ,as on 1/4/2001
3) I assume, it is immovable property ,and ,has long term capital gain
4) check the municipal value, as on date, you intend to sell property
5) the sale value cannot have more than 10 percent downward rate, as per municipal value, else tax will be on municipal value
5) calculate value of property by indexing it , by reffering to incometax indexation
6) adjust expenses if any
7) arrive at capital gain by subtracting sale value with indexed value
8) invest long term gain as per sec 54, 54F 54EC......be careful to invest as per above sec, because each section has different property investment deductions
9) pay capital gains tax, if ,any, after above investment, @ 20 percent

CA Salman Ansari (Salman Ansari & Assoc.) (247 Points)
Replied 06 August 2021

Three key aspects to focus on (from the points discussed above):

1) Whatever consideration you sold the property for, if it is not close to the Stamp Duty Value, then capital gain will be calculated as per Stamp Duty Value, not actual consideration.

2) You should prefer to receive the consideration through A/c payee cheque or electronic transfer, even though there is no problem is receiving the consideration in cash or in kind.

3) In order to avail tax benefit against such capital gain arising, explore your options and invest appropriate amount in manner specified in section 54, 54EC and 54F (even 54G, if that suits you).