Tax Slab application for Combination of Income and Capital Gains

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  1. vivek_taxquery

    vivek_taxquery New Member

    Hi,

    Suppose a senior citizen has approximately Rs. 1.5 Lakhs Income (Fixed Deposits) and LTCG of Rs. 63 Lakhs from property sale.
    The citizen has invested most of the capital gains amount in buying new property as well as in Tax free bonds, after which the next taxable capital gains comes to around Rs. 4 lakhs.

    Being a senior citizen, he is eligible for Income Tax exemption upto Rs. 3 Lakhs.

    In such a case,do we apply Income Tax Exemption (3 Lakhs) and LTCG Tax Exemption (Purchase of new property, bondsetc) separately to the Income Amount and Capital Gains Amount respectively?

    In case they are to be treated separately, then in this case the Income tax becomes zero (income below Rs. 3 Lakhs)and CG tax exemption will be based on howmuch amount is invested in newproperty, bonds,etc.

    In case both the incomes are to be combined to compute the total income, the situation gets more complex, in which case, I will need more clarityon how the tax exemptions and tax slabs will be applied.

    Thanks a lot!

    Regards,
    Vivek.
     
  2. rudrabose

    rudrabose Active Member

    The treatment in such a case would be as follows:-

    Taxable Income from FD - 1.5 Lakhs
    Taxable Income from Capital Gains - 4 Lakhs

    The tax exemption limit for Senior Citizens for FY 14-15 is 3 Lakhs. This exemption would first be adjusted with Income from FD i.e. 1.5 Lakhs and the balance 1.5 Lakhs would be adjusted with Capital Gains.

    Out of Capital Gains of Rs 4 Lakhs - 1.5 Lakhs would be adjusted and balance Rs 2.5 Lakhs would be taxable @ 20% i.e. Tax Rate for Long Term Capital Gains.

    This is a slightly complicated computation. In case of any further queries or clarifications feel free to ask here.
     
    vivek_taxquery likes this.
  3. vivek_taxquery

    vivek_taxquery New Member

    Hi Rudra Bose,

    Thanks a lot, it was a big help!

    If I have any further queries on this,I will definitely post the same here.

    Regards,
    Vivek.
     
  4. Shambhu

    Shambhu New Member

    MR X TOOK A LOAN OF RS 1000000 ON 01.09.2011 FROM STATE BANK OF INDIA
    ,@7.5% P.A. FOR CONSTRUCTION OF ONE HOUSE WHICH WAS COMPLETED ON
    01.07.2013 AND WAS LET OUT @ RS. 45000 P.M. MUNICIPAL TAXES PAID ARE RS.
    20000. MR X HAS TAKEN ANOTHER LOAN ON 01.12.2013 FOR RS. 1000000 @ 8% FROM
    PUNJAB NATIONAL BANK TO REPAY THE EARLIER LOAN. THIS HOUSE WAS SOLD BY HIM
    ON 01.03.2014 AND THERE WERE STCG OF RS. 150000. COMPUTE HIS TOTAL INCOME
    FOR THE A.Y. 2014-2015.
     
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