Taxation of capital gain out of equity

Tax queries 357 views 2 replies

I had ESOPs of an private limited company. (in around 2001)

after a pretty long time, the company got taken over some foreign company.

Now, due to this I had to sell all shares 2013-2014, and i got a handsome profit out of it.

The amount of profit was such that I cannot pay tax on it. And I decided to invest in a residential property.

Now, I already own a residential property and have one housing loan running on it.

I calculated the indexed cost of my purchase and deducted from my sell value to get the capital gain. I invested this in the Capital Gain Tax Savings Scheme to park the fund for finding the resindential property.

Now, while filing return, my honourable CA has considered following, which I think is incorrect.

1. Since I have one property, I cannot get the benefit of this scheme/section

2. according to me, I should have invested the net sell value (capital gain amount) and I have invested the same, but my honourable CA guides me that I need to invest the full sell value (without deducting the indexed purchase cost)

I am looking for your genuine guidance on the matter.

Thanks

Replies (2)

Having one House property at the time of buying a new one for capital gain benefit is allowed. But your CA is correct you should have invested the net sale proceeds and not net capital gain. If you invest anything less than the net sale proceeds you will get proportionate exemption only. I.e if Sale proceeds is S, capital gain is C and cost of New House is H the exemption = S x H/C

 

Thank you Rajagopalakrishna ji

I understood your point.

I need to invest in the new residential property with full Sell value (S). 

But, do I need to invest the same in the "Capital Gain Tax Saving Scheme"? or there I need to invest only the Capital Gain (C)? 

Actually, I have parked the fund (C) in the Capital Gain Tax Saving Scheme, and if required I can invest amount (S) in new property. As per my estimation the new house value will be higher than (S), so in anyways it is going to be invested like that.

So, please advice how can i avoid unnecessary tax on this transaction


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