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Mihir Tanna  |349 Answers  |Ask -

Tax Expert - Answered on Mar 15, 2023

subhash Question by subhash on Mar 03, 2023

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My father bought a land 0f of 5000 sft for Rs Rs 3500 in 1959.He constructed a 1500sft house on the land in 1967 for Rs 30000 . He passed away in 1986.Self and mother became owner.Mother passed away in 2011and Ibecame the owner. The building and land together was given to a builder in 2015 for construction of flats.As per the agreement I have received 4 flats and construction was completed on 27.11.2021 and handed over to me. Now I have sold one flat (out of four)for 18 lakhs. I want to know whether it will be short or long term capital gain ? I do not want to re invest in property and want to pay appropriate amount of tax .Kindly guide me with procedure.Whether I need to open a separate account in bank and park this money till I pay tax? Thanks. s guha.
Ans: For taxation on redevelopment, there was amendment from 1.4.2018. Before said amendment, when property is transferred to builder for development, capital gain chargeable to tax. I understand that you have not paid any tax in the year in which property is transferred to builder, accordingly, it is advised to take proper consultancy from tax consultant.
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Mihir

Mihir Tanna  |349 Answers  |Ask -

Tax Expert - Answered on Nov 17, 2022

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I am a senior citizen retired pensioner. I had intention to sell my both properties located in one town and to invest in one property in another town where I wanted to settle in my retired life. I wanted that the sale proceeds of my two properties should be almost same as the purchase value of a single property in another town to settle there. I had bought a property in 2015 at Rs 40 lakh in my single name and sold in Feb 2022 at Rs 52 lakh. The buyer deducted 1% TDS and filled in form 26QB and I got form 16(B) from buyer and details of TDS are seen reflected in my Form-26AS. Thereafter, my 2nd property that I had bought @Rs 7.3 lakh 20 years back, was attempted to dispose, but did not materialise till now.  Anyway, I bought a 5-yr-old jointly owned property from a couple at Rs 80 lakh in June 2022 and deducted 1% TDS (@0.5% from each owner), filled in Form 26QB and provided form 16(B) to the sellers.  So, I invested the sale proceeds of my 1st house 'within a year' of its disposal, in buying a house from Long Term Capital Gain point of view. My IT Return for AY 2022-23 was filed in July 2022 and it got approved. The 1% TDS deducted by buyer on my 1st property sale got refunded/ adjusted.  I am still trying to sell my 2nd property 'within one year' of buying the June, 2022 property. I want to do this to take benefit of Long Term Capital Gain Tax. I want to know whether I am going to get the IT benefit by selling my 2nd property 'within one year' of purchase of my June 2022 property ? I am more eager to know how sale of 1st property in financial year 2021-22 (Feb.'22), purchase of a property in FY 2022-23 (June'22) and again sale (proposed) of 2nd property, (all within 2 years from LTCG point of view) are shown in my next IT Return (AY2023-24).  I am eager to hear from you, Sir!
Ans: As you must be aware, if person wants save tax on capital gain, person should acquire another residential house within a period of three years from the date of transfer of the old house or should construct a residential house, within a period of one year before or two years after the date of transfer of old house.

With effect from Assessment Year 2021-22, the benefit in respect of investment made in two residential house properties is available. The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of long-term capital gains does not exceed Rs 2 crore.

If assessee exercisesoption, he shall not be entitled to exercise this option again for the same or any other assessment year.

Benefit will be lower of following:

  • Amount of capital gains arising on transfer of residential house; or
  • Amount invested in purchase/construction of new residential house property

If till the date of filing the return of income, the capital gain arising on transfer of the house is not utilised (in whole or in part) to purchase or construct another house, then the benefit of exemption can be availed by depositing the unutilised amount in Capital Gains Deposit Account Scheme in any branch of public sector bank, in accordance with Capital Gains Deposit Accounts Scheme, 1988.

So in your case, if you satisfy all the prescribed conditions (including acquiring new property within 3 years, depositing unutilised amount in capital gain deposit account and disclosure is made regarding same in ITR of AY 2022-23 & AY 2023-24); you will get IT benefit.

(more)
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Mihir

Mihir Tanna  |349 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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