CAPITAL GAINS TAX

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  1. A K DARAD

    A K DARAD New Member

    My father (84), who is not an assesse, is going to dispose of his land alongwith house built on it for a consideration of Rs. 46,50,000/- which he had bought in 1979 for a consideration of Rs. 2000/- and subsequently spent an amount of Rs. 1,00,000/- towards building a house on it in 1984. Consideration receivable for land is Rs. 40, 00,000/- and for house, it is Rs. 6,50,000/- Now please guide us with regard to the following.
    1. What is his long term capital gain and how much capital gains tax he will have to pay ?
    2. What are the best capital gains bonds available in the market?
    3. Are the maturity proceeds of these bonds free from any tax liability after 3 years ?
     
  2. V K Khanna

    V K Khanna Active Member

    Land was purchased by your father in 1979 while the indexation benefits came into being wef 1.4.1981. Your father has an option either to retain the original price at which the land was acquired in 1979 or get the land price revalued as on 1.4.1981 through a Govt approved Valuer and then apply indexation benefits on the revised value till the year of sale of the property. Similarly, indexation benefits will also accrue to your father on the building portion of the property from 1984 till the year of its sale. Thus you can arrive at the total cost of acquisition of the property ( land and building) after indexation.

    1. The long term capital gains would be the sale price of the building minus its cost of acquisition after indexation benefits. The tax payable will be 20% of the LTCG.

    2 The capital gain bonds are currently offered for sale by two public sector companies namely REC and NHAI. Both the companies have credit rating of AAA . You can go through their prospectus carefully from their website before investing.

    3. The principal value of the bonds is tax free on maturity. However, interest that will accrue annually on the amount invested will be taxable in the hands of your father.
     
    ZED likes this.
  3. A K DARAD

    A K DARAD New Member

    Thanks,
    You have enlightened us with a very clear & consize guidlines. We are interested more in investing in bonds than in a property, so that it may generate some income also. Thanks a lot once again
     
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