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Ramalingam

Ramalingam Kalirajan  |5092 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 01, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Sriramulu Question by Sriramulu on Mar 27, 2024Hindi
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Sir, I am intending to sell our FLAT at Hyderabad, which was purchased in the year 2014 for Rs.24,00,000/-, now the present market rate is Rs. 65 lakhs (approximately). If I sell the Flat for 65 lakhs, how much tax(LTCG) I have to pay or is there any exemption under IT Act as I am not interested in purchase of another house, instead, I am proposing to purchase Agricultural land with the sale proceeds of my Flat. Anxiously awaiting for your valuable advice in this regard, Thanking You Sir, Yours faithfully, G.Sriramulu, Retired employee, HYDERABAD.

Ans: Based on the information you've provided, you'll likely incur Long-Term Capital Gains (LTCG) tax if you sell your flat in Hyderabad. Here's a breakdown:

Scenario:

Flat purchased in 2014 for Rs. 24,00,000
Expected sale value in 2024: Rs. 65,00,000
Holding period: Over 24 months (Long-Term Capital Gains)
No reinvestment in another residential property
Tax Calculation:

Capital Gain: Rs. 65,00,000 (Sale value) - Rs. 24,00,000 (Purchase value) = Rs. 41,00,000
Indexation benefit: However, you'll likely benefit from indexation, which adjusts the purchase price for inflation, reducing your taxable gains. You can calculate the indexed cost using the Cost Inflation Index (CII) provided by the Income Tax Department for the relevant years.

LTCG Tax Rate: After considering indexation, the remaining capital gain will be taxed at 20%.

Important Note: I cannot provide the exact tax amount due to the complexity of indexation calculations.

Exemption Not Applicable:

Unfortunately, purchasing agricultural land doesn't qualify for exemption under Section 54 of the Income Tax Act, which offers exemption on LTCG from the sale of residential property if the gains are reinvested in a new residential property.

Recommendations:

Consult a Chartered Accountant (CA): A CA can help you calculate the exact LTCG tax liability after considering indexation and other relevant factors. They can also advise on any potential tax-saving strategies that might be applicable in your case.
Explore LTCG Investment Options: While you're not interested in buying another house, consider exploring other options to potentially save on LTCG tax. These include:
Capital Gains Bonds: Investing in specific long-term capital gains bonds issued by the National Housing Bank (NHB) or other government bodies can help you save tax under Section 54EC.
New Residential Property: If you're open to the idea of a new property in the future, remember the exemption under Section 54 applies.
Remember: This is just general information, and it's crucial to consult a professional for personalized tax advice based on your specific situation
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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Sanjeev

Sanjeev Govila  |458 Answers  |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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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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