Capital Gain Tax

Hello,

Purchased apartment in Aug 2003 for 7,00,000
Sold Apartment in March 2011 for 29,00,000

Entire amount in Capital Gains Saving Account since July 2011

Considering CII, I have calculated the Capital Gains Tax to be paid = 2,37,365
Is this correct?


Can this tax be saved if I
1) Invest in an under construction apartment to be completed only by 2015?
2) In a villa, where Land registration will be done by Feb 2014 and priced at 30,00,000
Construction of villa will be completed by Aug 2014?
3) Buying only a plot of land worth 20,00,000

Or is there any other way to save the tax, say, by now investing into relevant bonds?

Thanks

Sameer

 

Indexed Cost of Acquisition = Year of Purchase x (CII of year of sale/CII of year of Purchase)
= 700000 * 711/463
= 10,74,946

Sale Price = 29,00,000

Capital Gains - 2900000-1074946 = 18,25,053

Capital Gains Tax @ 20% = 3,65,010

You can invest your Capital Gains in any of the 3 options and all your Capital Gains would be exempted

 

Neha, thank you for the quick reply.

My concern is that since the property was sold nearly 3 years back, doesn't the IT law require the property to be in 'possession' by this time?
Or can I still take an under construction property?

 

The income tax act is silent on whether the property should be purchased in 3 years or it should be in possession in 3 years....

Practically, CA's are advising their clients that even if the property is under construction, you can claim the exemption...

 

Neha, thanks again. My dad, who owns this property, also got a similar advice.

But I thought that you have to purchase an Apartment in the first 2 years. And if going for constructing a house then, it can be 3 years.
Is my understanding correct?
If yes, then can a villa qualify as a home construction?

Also if say we go with purchasing now, and later get pulled up for delay in tax payment. What would be the implications, fines?

I also read that you can choose to pay a flat 10% tax instead of going for indexation? is it true? Can it be done even now, after over 2 years since sale?

Thanks again.

 

Dear Sameer

I'm sorry, amt shd be invested in 2 years instead of 3 years

And in such a case, i'm doubtful if you wld be able to claim an exemption.

And yes - you can opt for 10% tax without indexation.

Refer the following links:


http://www.charteredclub.com/section-54/


http://www.charteredclub.com/capital-gain-tax/

 

Thank you Nisha.

I am little confused by this clause now

The Amount of Capital Gain which is not utilised by the Assessee for the purchase or construction of the new house before the date of furnishing of the Income Tax Return should be deposited by him under the Capital Gains Account Scheme, before the due date of furnishing the return. The proof of such a deposit shall be attached with the Income Tax Return. In this case, the amount already utilised by the assessee for the purchase/construction of the new house shall be eligible for exemption

In this case, let's say my father opts for a villa, which includes land registration + construction. Now land cost is say 30lakhs.
Since this would involve all Capital Gain amount, there is no tax liability, even though house is not constructed?

Alternatively, he buys a plot now for say 18 lakes, then only the balance amount of 25,303 is taxable?

Once again thank you very much for your patience.

 

The time duration in case of purchase of residential property is 2 years and in case of construction, it is 3 years

In your case, 2 years have already lapsed and therefore you can only claim exemption for construction.

 

Thank you Neha.

Yes I have to go with constructing a property. What happens if I am unable to complete the construction, and have already spent part or whole of the capital gain already?
Ami i still taxed on the whole capital gain? Or only on the remaining amount?

 

You would be taxed on the remaining amount.