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Mahesh

Mahesh Padmanabhan  |124 Answers  |Ask -

Tax Expert - Answered on May 20, 2023

Mahesh Padmanabhan has specialised in payroll, personal and corporate taxation for more than two and a half decades, enabling him to provide practical, realistic and correct advice to his clients.
He is a member of The Institute of Chartered Accountants of India and has a degree in cost accounting from the Institute of Cost Accountants of India.
He is also a qualified information systems auditor. ... more
Thomas Question by Thomas on May 20, 2023Hindi
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Sir, On 14-June 1994, I acquired a flat (tenement) in my own name for Rs. 2,98L. In April 2015, I had to spend Rs. 4.15L on general renovation of this flat. Now, I plan to sell this tenement and wish to invest its sale proceeds within two years of the sale in buying a ready possession flat in another city. My queries are follows: 1. Can I invest the sale proceeds in buying two flats in the same society of the new city or do I have to necessarily invest in one property only? 2. Can I add the name of my spouse and my son also as co-owners in the new property(s) even if their financial contribution is nil? 3. Can I add the name of my spouse and my son also as co-owners in the new property(s) in case they also partially contribute financially in the purchase of the new flat(s)? 4. What is the present applicable Indexed Cost of the flat planned to be sold by me?

Ans: Hi Thomas
As the base year for Cost Inflation Index (CII) has been reset to 2001, you may need to get a valuation done through an approved valuer to identify the value as on April 1, 2001. If this value is higher than Rs. 2.98 Lakhs then you could use that as the cost.

As regards the general renovation amount spent, it may not be allowed to be added as cost of the property as generally tax officers are not dispensed to allow it.

W.R.T. your decision to reinvest in a ready possession flat within 2 years, please note that if this investment is extending beyond 6 months OR due date for filing your tax returns (whichever is earlier), you would need to open a Capital Gain Account Scheme (CGAS) account with a nationalized bank and park the capital gain amount in it for reinvestment.

Now answering your queries

Query 1 - If the capital gain amount does not exceed Rs. 2 Crores then you could reinvest in 2 residential units. This however is a one time option and cannot be used again in any other year.

Query 2 - Yes you could add their names but they would be treated as name-sake owners and for all purposes of taxation, you would be taxed singly.

Query 3 - You can add their name as proportionate owners to the value of their contribution. The taxation of income in that case would be based on their contribution

Query 4 - The answer to this would depend on the valuation report. Nevertheless, you could derive the indexed cost yourself by multiplying a factor of 3.48 to the cost. An example would be as follows:

Suppose the cost is Rs. 2.98 Lakhs
Indexed cost would be Rs. 2.98 Lakhs x 348 / 100 OR 2.98 Lakhs x 3.48 = Rs. 10.37 Lakhs
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Mihir

Mihir Tanna  |1042 Answers  |Ask -

Tax Expert - Answered on Sep 29, 2022

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Dear Mr Mihir, I would like to know the following points: I bought a flat in Thane - 400603 @ rs.one lakh in Dec.'1983 & would like to sell now this year 2022 @ rs.64 lakhs. Pl. let me know the amount of Property Gain Tax (Long Term) which I have to pay now considering 'Ready Reckoner Rate' at Thane - 400603 area or how to calculate the same to get taxable amount? Also can I (as Sr. Ctzn.) get a tax exemption as I already bought (in joint ownership where my wife is 1st owner) another flat @ rs.75 lakh in Thane in Nov '2020? May I invest taxable amount (if any) in Govt. Bonds like NHAI / REC / PFC to get tax exemption & what interest I will get for how many yrs. or else if it will be better to invest my selling amount in good Flexi Cap Mutual Funds for 5 years after paying entire taxable amount to recover the same? Will appreciate your prompt feedback in detail.
Ans: Capital gain on sale consideration will be reduced by Indexed cost of acquisition and allowable expenses incurred on transfer. You have to calculate indexed cost of acquisition by applying Cost Inflation Index as per prescribed formula on cost of acquisition.

For cost of acquisition, you may take actual cost or fair market value of the asset, as on 01.04.2001.

In case of land and building, fair market value on 01.04.2001 cannot exceed stamp duty value as on 01.04.2001.

Exemption is available if amount of capital gain is invested by purchasing a new residential house within one year before or within 2 years after the date of transfer of the residential house.

As you have already got possession of new property in November 2020, you will not be eligible for exemption.

Decision of investment in specified bonds or acquiring tax mutual funds can be taken after considering several factors like risk appetite, amount of tax liability on capital gain, availability of surplus fund etc.

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Milind

Milind Vadjikar  |1153 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 18, 2024

Asked by Anonymous - Sep 17, 2024Hindi
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Hi , I am 45 yr old, two daughters aged 13,10. My asset are a flat worth 1.75 cr, stocks ,85lacs, PPF- 20lacs, PF 40 lacs, MF -5 lacs, and my has a investment of 15 lacs in equity and 10 lacs in MF. We own two parcels of land worth 75 lacs. We don't have any loans and we take home 3.75 lacs. I am moving to tier 2 city, and moving to a rental property. My flat is 20 yr old and it has reached its full value depending on the area. I want to sell my flat and invest the proceedings into MF for a period of 4-5 yrs before buying a house in tier 2 city. Is it advisable to sell it. The flat is tier 1 city and I don't live inthat city
Ans: I propose that you estimate the long term(assumed) capital gain tax liability that may arise after sale of this flat considering indexation or without indexation as is optimal for you. Next consider the future redevelopment potential in the tier-1 city particularly in the area where you have the flat. Another point to be borne in mind is if your daughters need to move to tier-1 city in future for better coaching, education, prospects then this aspect needs to be considered. If you still want to sell the flat then time it in such a way when you want to buy new residential property in tier2 city because you can utilise all your gains here without paying any capital gain tax(Section 54 of Income tax act allows exemption subject to conditions) and/or buying section 54 EC Capital Gain bonds to save LTCG payment(50L per FY limit & 6 months within sale of property subject to eligibility).

Unless you have strong knowledge of markets or an investment advisor to assist you, I would recommend you to redeem your(family) stock holdings(subject to high volatility and needs regular monitoring) of 85L+15L and invest it in a staggered manner into equity savings and value focussed balanced advantage fund for horizon of 4-5 years.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing

You may follow us on X at @mars_invest for updates

Happy Investing!!

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Ramalingam

Ramalingam Kalirajan  |8191 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 06, 2025

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Hi sir/madam I wanna ask that i have already a capital gain account for rs 30 lac Whose 2 years going to complete in feb 2026 Now i have just 2 flat left- ist floor, 2nd floor with tarace Now 3 different- different person want to buy ist, 2nd and terace, means 3 registry will made, now approxy it will generate 10 lac per floor capital gain after indexation... Meqns total 30 lac So this 30 lac+ capital gain account 30 lac.. A total of 60 lac can i invest in 1 residentiql flat... Is it possible that i will invest in one flat against sale of 3 flat + capiral gain account amount... Thanks
Ans: Yes, you can invest the total Rs 60 lakh in a single residential flat to claim capital gains exemption under Section 54 of the Income Tax Act. However, there are a few conditions you must follow:

Key Conditions for Claiming Exemption
The new property must be a residential house. It should not be commercial or under construction beyond the allowed timeline.

The investment should be within the allowed time frame. You must buy the new flat within 2 years from the date of sale or construct it within 3 years.

You can use the amount from multiple sales. Even if you sell different floors of your property to different buyers, you can reinvest the total capital gain in one residential flat.

The capital gains account balance should be used within the allowed period. You must invest the Rs 30 lakh in the new house before February 2026. Otherwise, it will become taxable.

Important Considerations
If the new property costs less than Rs 60 lakh, the unused capital gain will be taxed.

The exemption applies only to long-term capital gains. If any portion of your gain is short-term, it will not qualify for exemption.

You must not sell the new property for at least 3 years. If you sell it before 3 years, the exemption will be reversed, and you must pay tax on the gains.

Final Insights
Yes, you can invest Rs 60 lakh in one flat and claim exemption under Section 54.

Ensure that you buy the new property within 2 years or construct it within 3 years.

Keep proper documentation for all transactions to avoid issues with the tax department.

If you need more clarity, consult a tax expert before making the final investment.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Mayank

Mayank Chandel  |2167 Answers  |Ask -

IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Apr 05, 2025

Ramalingam

Ramalingam Kalirajan  |8191 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 05, 2025

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Hi sir thnku in advance. I am 28M,working in central govt job. It has just been one year and I plan on retiring very early around a 35 years of age. I have nps tier 1 account due to the job. I just have one query since I don't plan on marrying and I am alone with my own home. My expenses are max 18k per month. I hardly travel and live a very frugal life. So my query if I resign at 35 years then will 50 lakhs will sustain me for 15 years keeping in mind the inflation and my return as 7% on an average.
Ans: Your question shows rare clarity at a young age. You are just 28. But you already have a defined vision to retire by 35. That is highly appreciable. Many at this age are still unsure of financial direction.

Let us now assess your question in detail.

You asked whether Rs 50 lakhs will last 15 years, post retirement at 35.

Let us evaluate your financial journey from all angles.

Understanding Your Present Situation

You work in a central government job. That offers job security. And also an NPS Tier 1 account.

You live frugally. Your monthly expense is only Rs 18,000. That is extremely disciplined.

You have your own home. So no rent or EMI outgo. This reduces your future cost burden.

You do not plan to marry. So your financial responsibilities are only for yourself.

You plan to retire at 35. That means only 7 more years of active income.

After 35, you want Rs 50 lakhs corpus to sustain you for 15 years.

That means till age 50, you want to live from this corpus.

Now let us move step-by-step to assess sustainability.

Assessing Expense Inflation Over Time

Right now, your expense is Rs 18,000 per month.

Even a frugal person cannot avoid inflation.

Prices of food, electricity, health, etc. will go up.

Inflation over 15 years cannot be ignored.

Even if inflation is modest, say 6%, your expense will rise gradually.

By year 10 or 15, your Rs 18,000 monthly expense may double.

That will need a higher withdrawal from your corpus.

So corpus sustainability depends on how inflation is planned for.

Evaluating Return Assumption

You assume 7% average return on corpus.

This is realistic if money is well invested.

You must avoid only FDs or savings accounts.

To get 7% post-tax, proper asset allocation is needed.

Mutual funds can help here.

Especially, actively managed funds with a Certified Financial Planner.

Avoid index funds. They just copy the index.

Index funds do not give downside protection in bear markets.

They also underperform during volatile sideways markets.

Index funds have no fund manager taking active decisions.

Whereas actively managed funds adapt to market cycles.

A qualified CFP can help select suitable active funds.

Regular plans through a CFP give ongoing guidance.

Direct funds may look cheaper, but lack this support.

Direct funds are like self-medication. Risky without expert view.

Regular plans have a small fee, but offer long-term peace.

Corpus Withdrawal Planning

Your Rs 50 lakh must support monthly cash flow.

Even if you start withdrawing Rs 18,000 monthly, over time it will increase.

You need a withdrawal strategy.

You can follow a staggered withdrawal.

That means only taking what is needed each year.

Rest of the money keeps earning.

It also helps reduce tax burden.

But you must track how much you withdraw each year.

And ensure it grows in line with inflation.

If not planned well, corpus may finish earlier.

So withdrawal plan should be dynamic, not fixed.

A Certified Financial Planner can help prepare such a roadmap.

Emergency and Health Preparedness

You are alone. That means no support system in emergencies.

You must keep some contingency fund aside.

At least 12 months of expenses, i.e., about Rs 2.5 lakhs.

This should be liquid. Like in sweep-in FDs or ultra-short debt funds.

Also, ensure you have a strong health insurance policy.

Healthcare cost rises faster than inflation.

Even a single surgery or hospitalisation can dent your corpus.

Do not rely on employer health cover post resignation.

Buy your own health insurance before retirement.

Choose Rs 20–30 lakh cover. Preferably with a super top-up.

Keep paying its premium from a separate health corpus if needed.

If you stay healthy and insurance unused, that is a blessing.

But if not, it will safeguard your financial independence.

Psychological Readiness for Early Retirement

Financial numbers are only part of the journey.

Are you ready for non-financial changes post-retirement?

How will you keep yourself engaged from age 35 to 50?

No daily job, no team, no deadlines. That may feel strange.

Mental health and social belonging are also essential.

Plan for what you will do post retirement.

Hobbies, part-time work, teaching, or creative work.

Something that gives meaning to your day.

Else early retirement may feel empty after some years.

Personal fulfilment is important, not just financial planning.

Tax Implication of Your Investments

Returns from equity mutual funds have a new rule.

Long-term capital gain (LTCG) above Rs 1.25 lakh taxed at 12.5%.

Short-term gains (STCG) are taxed at 20%.

This affects how you redeem funds.

Withdraw strategically to reduce tax.

Do not withdraw large amounts in one go unless needed.

Spread withdrawals over financial years.

Plan investments so equity and debt are balanced.

This helps with tax and market stability.

NPS Tier 1 – How It Helps

You already have NPS Tier 1 account.

You can continue it even after quitting job.

But withdrawals are restricted before age 60.

You can withdraw only 20% before 60 if not annuitised.

So it may not be useful for your 35–50 needs.

But it can be your backup after 60.

So continue it. Don’t touch now.

Let it grow. It adds to your retirement safety.

It cannot be your main retirement plan for early years.

How You Should Build Rs 50 Lakh Corpus

You have 7 years left to save.

That is a short horizon for such a big goal.

You must save aggressively now.

Keep lifestyle minimal, as you already are doing.

Avoid unnecessary gadgets, dining, or gadgets.

Every rupee saved now compounds for your future.

Invest in a well-planned mutual fund portfolio.

Include large cap, mid cap, and flexi cap funds.

Avoid thematic or sectoral funds. Too risky for main corpus.

Also add short-duration debt funds for stability.

Review this plan once a year with your CFP.

Increase SIPs with each salary hike.

Also allocate your yearly bonus fully into investments.

Rs 50 lakh target is tough but possible with discipline.

Asset Allocation Approach

Corpus should not be 100% in equity or 100% in debt.

A balanced approach is better.

Early years of retirement can bear some equity.

Later years should gradually shift to debt.

This is called glide path strategy.

Helps avoid sequence of returns risk.

If market crashes in year 1 or 2, your corpus shrinks fast.

So first 3 years’ expenses should be in debt.

Remaining in equity-debt mix as per risk profile.

Rebalancing is important each year.

Do not ignore this step.

It controls risk and improves return consistency.

Finally

Rs 50 lakhs can last for 15 years if:

You invest it wisely.

Withdraw in a disciplined way.

Factor in inflation, taxes, and health cost.

Keep emergency corpus aside.

Stay insured for health and critical illness.

Engage yourself meaningfully post-retirement.

Review your plan annually with a Certified Financial Planner.

Early retirement is not a one-time plan.

It is a living strategy that needs updates.

You are on the right path.

Stay focused. Stay simple.

And always seek guidance when needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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