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Mahesh

Mahesh Padmanabhan  |120 Answers  |Ask -

Tax Expert - Answered on May 03, 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
DEBASHISH Question by DEBASHISH on Apr 12, 2023Hindi
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Money

GOOD AFTERNOON MY PARENTS HAVE SOLD A PROPERTY ( FLAT) IN DELHI RECENTLY.( JAN 2023) TOTAL SALE VALUE: AROUND 75 LAKHS THIS FLAT WAS PURCHASED BY THEM IN 2003 AT 4,25,000 . I WANT TO KNOW HOW MUCH MINIMUM CAPITAL GAIN TAX IS DUE FOR THEM. THEY PLAN TO PURCHASE ANOTHER PROPERTY WITH ME. ( SOME CONTRIBUTION FROM MY SIDE) AND GIVE SOME AMOUNT TO MY SISTER ALSO. HOW MUCH AMOUNT CAN THEY TRANSFER TO MY SISTER AS GIFT AND HOW MUCH AMOUNT DO THEY NEED TO INVEST IN NEW PROPERTY TO AVOID CAPITAL GAINS TAX . KINDLY ADVISE ON THE SAME THANKING YOU BEST REGARDS D. MUKHERJEE HOWEVER,

Ans: Hi Debhashish,
Assuming that the purchase was done in FY 2003-04, the indexed cost of acquisition is approximately Rs. 13,56,000 and accordingly the long term capital gain is approximately Rs. 61,44,000.

Considering the above, gift to your sister could be Rs. 13.56 Lakhs and reinvestment in new residential property to achieve Zero tax status would be Rs. 61.44 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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I have some queries regarding tax on sale of my property which I need to show in my Income Tax return in FY-2023-24. I had purchased a flat in Kolkata at a total cost of 8.50 lacs [including registration cost] and registration was done in April, 2004. I had sold the said flat in May,2023 at Rs.31 lacs. My queries are :- 1. Do I need to pay Capital Gain tax on the sale of this flat ? 2. How much tax do I need to pay ? 3. How to show this capital gain income and tax in my Income Tax retirn next year ? Please advise. Regards, Ratan K. Saha
Ans: You need to understand the following things about taxation of your flat:-
1. You have earned a profit (called capital gains in this context) on the sale of your house. So tax is due.
2. However, tax will not simply be 31L – 8.5L. The Govt gives you an advantage of inflation over the years which increases your purchase cost through a process called ‘Indexation’, thus decreasing your tax. Please google and read up on it, or contact a good CA or a financial advisor.
3. You also get credit for registration and stamp duty charges, brokerages paid as also any improvements done in the house of a permanent nature.
4. Please read up on Income Tax Section 54 which also gives out how you can save tax on your final capital gains arrived at.
5. The entire calculations and sale/purchase details have to be shown in the ITR. Most probably you will be filling ITR-2 for this next year but please ascertain the same when you are about to file the tax since rules keep changing.

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Sir, during this month (August2023) I sold my flat which was purchased by me in 2010. The total sale consideration as per govt guidelines was Rs 5973000/ and was registered at that amount, accordingly TDS at 1% on it was deducted at Rs 59730 and was credited to the govt account. My query is , TDS on sale of property at 1% is applicable in case the amount of sale exceeds Rs 50.00 lakhs . Whether the TDS is applicable on full sale consideration or on the difference amount ie, (5973000-500000)Rs 973000. 2. I had purchased the flat in April 2010 and the purchase price was Rs 3150000/ including Stamp duty, Registration charges and small amount towards interior work. I request you to advise me the applicability of Capital Gain Tax on it. Now I do not want to invest in any new property or in Capital gain bonds, I want to pay the applicable tax and close the transaction. Please advise me about the applicable Tax and close the formalities applicable in this regard. Siddramappa Kudarimoti.
Ans: The TDS (Tax Deducted at Source) of 1% on the sale of property exceeding Rs 50 lakhs is applicable on the full sale consideration. In your case, since the total sale consideration was Rs 5,973,000, the TDS of Rs 59,730 was deducted as per the guidelines. Based on the information you've provided, you might be liable for Capital Gains Tax. Capital Gains Tax is calculated based on the difference between the selling price and the indexed purchase price. The indexed purchase price adjusts the original purchase price for inflation over the holding period.
The tax on long-term capital gains is usually 20% (plus applicable surcharge and cess) after considering any exemptions or deductions available under Section 54 or Section 54F if you are not investing in another property or capital gains bonds.

To close the transaction and fulfill your tax obligations, you should consider the following steps:

a. Calculate Capital Gains: As explained above, calculate the capital gains based on the indexed purchase price and selling price.

b. Pay Capital Gains Tax: If you decide not to invest in another property or capital gains bonds, you will need to pay the applicable capital gains tax. You can do this by filling out the appropriate sections in your income tax return and paying the tax amount.

c. File Income Tax Return: Ensure that you accurately report the capital gains in your income tax return for the assessment year.

d. Keep Documentation: Maintain all relevant documents related to the property sale, purchase, and tax calculations for future reference

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I am 37 years old , and having 2.10 lacs salary in hand, I have SIP of Rs. 20k, apart from SIP I have invested in stock current market value is 10L, I have three flats which is cost approx 2.5 cr, i have a home loan as well of 35 lacs. Kindly guide me how I can achieve the milestone of 10 crore corpus in next 15 years.
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Current Financial Snapshot
Income and Investments
At 37 years old, with a salary of Rs. 2.10 lakhs per month, you have a solid foundation. Here's a snapshot of your current investments:

SIP Investment: Rs. 20,000 per month
Stock Investments: Current market value of Rs. 10 lakhs
Real Estate Holdings: Three flats valued at approximately Rs. 2.5 crores
Liabilities: Home loan of Rs. 35 lakhs
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1. Optimize Investment Portfolio
Review Existing Investments
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Stocks: Assess the potential for growth and consider diversification if necessary.
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SIPs: Continue disciplined investing. Evaluate if the current SIP amount needs to be increased to meet the Rs. 10 crore target.
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Legal Consultation: Seek legal advice to explore options like sending legal notices, mediation, or filing a suit in a court of law if necessary.
Financial Impact: While pursuing legal action, continue focusing on building your financial assets through disciplined investments.
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Achieving a corpus of Rs. 10 crores in 15 years demands a balanced approach involving disciplined savings, strategic investments, and proactive debt management. Leveraging existing assets like stocks and real estate alongside increasing SIPs and exploring diverse investment avenues is key. Engaging with a Certified Financial Planner ensures a structured approach, optimizing your path towards financial independence and security.

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K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

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