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Query on Capital Gains

N.V.K. Raman (Service) (31 Points)

14 January 2009

Dear Sir, I bought a house in December 2004 for 11 lakhs out of which home loan portion was 8 lakhs and home improvement loan portion was 3 lacs. Out of 11 lakhs, I had put 1.5 lakhs from my own sources. I sold the house in Aug 2008 for 20 lakhs. Now, how much will be my capital gains liability? My annual income is around 4 lacs. When & How should I pay the capital gains tax? Is there any advance tax liability involved and if so, when? If the date of adv tax has expired, how much interest I have to pay on that?

I had invested 3.7 lakhs in a land in Sep 08. Will this investment help me in reducing my capital gains tax liability? If so, how? Is it necessary to add the capital gains in the tax calculation by office or I can show it when I submit my returns. I would be grateful if you could answer my above queries. Thank you.

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2 Replies

Pavan Jain S (Chartered Accountant) (1575 Points)
Replied 15 January 2009

Computation of Capital gains for AY 2009-10:

Sale Consideration: 20,00,000

Less: Indexed cost of acquisition: 13,33,750

(11,00,000*582/480)

LTCG 6,66,250

LTCG tax @ 22.66% u/s 112 1,50,972

Since you have total income of more than Rs. 10 Lakhs (400000+666250), surcharge @ 10% will be applicable. You should pay the capital gain tax in advance as per following schedule:

On or before sep 15, 2008 - Rs. 45,291

On or before Dec 15, 2008 - Rs. 45,291

On or before Mar 15,2008 - Rs.60,390

If you have not paid the advance tax in time, you are liable to pay interest u/s 234C @ 1% p.m or part thereof.

Mere investment in land do not entitle you to deduction. If you intend to construct a HP on the land within a period of 3 years, you can claim deduction u/s 54. Alternatively, you can invest in NHB or REC bonds within a period of 6 months and claim decution u/s 54EC.

You need not give the details of capital gains to your employer. You can declare the same while filing your returns.

N.V.K. Raman (Service) (31 Points)
Replied 19 January 2009

Thank you for your clarifications. I have sent you one Private Message for some more clarifications. I am a Govt employee. I see that you have taken my total taxable income as above 10,00,000 (including capital gains). But, I am taxed at the normal rates on my annual income of Rs.4 lakhs minus applicable deductions u/s 80C, etc. I have home loan interest and principal repayments for 5 months as also rent paid for 7 months hence my tax excluding this capital gains tax comes to a mere 12000 or so. Is the capital gains portion to be clubbed again with my income and taxed as I will be paying 20% on the capital gains portion already. I would be grateful if you could clarify the same. Thank you.