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New Property Purchase Before Selling Old: Tax Implications for Ramesh?

Milind

Milind Vadjikar  |385 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 07, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Ramesh Question by Ramesh on Feb 06, 2024Hindi
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Hi Sir, I am buying and making full payment for a New Residential Property in Feb 2024 Costing Rs.1.5 Cr. Also, I will be selling one of my old properties for Rs.1.1 Cr. in March or April 2024. This was purchased in 2009 for Rs.36 Lakhs, Capital gains is of Rs.38 Lakhs after indexation. PS. I own 4 Residential Properties as on date. My query is, if I make the payments for my new property from my Savings, prior to selling and receiving the payment of my old property, what is the Tax implications for the Capital gains. Secondly, I have also sold my Mutual Fund with long term capital gains of 12 Lakhs, can I claim tax exemption if I invest in the new Property. Looking forward to your valuable advise. Thanks Ramesh

Ans: You will have to pay LTCG on old property sale @ 20% with indexation which would ~7.6L

Sec 54F benefits are applicable for second property. Since you already have 4 properties in your name I believe you won't be eligible to claim benefit from LTCG accruing out of MF sale transferred to acquire RE property, however suggest you seek alternate opinion from CA.
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

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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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Sanjeev

Sanjeev Govila  | Answer  |Ask -

Financial Planner - Answered on Jul 28, 2023

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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 the median package at ssnce for cse core is less than rvce ise .So does it make more viable option considering placement in mind .I have a dream of becoming software engineer from my childhood. But my seniors are advising for rvce ise.what to do should I follow my dream or placement.I am a Bangalore resident and Tamil is my mother tongue.
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