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Mihir

Mihir Tanna  |1054 Answers  |Ask -

Tax Expert - Answered on Mar 17, 2023

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more
Asked by Anonymous - Mar 14, 2023Hindi
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Hello Mihir Sir, You might be aware of domain buying/selling business, Actually My son has sold a domain and worked as broker and accordingly the transaction has been successfully completed (transaction was done thru a firm which clear path for safe deal in US and disburse the amount according to deal) against which he got a commission in USD, the same was remitted by bank , the amount is about Rs.64.00 lacs, this was the first deal which is done by him, in the coming days there may be more deals. I want to know what will be tax liabilities on this income and coming income, and which ITR shall he submit to fulfill the Income Tax requirement. Humble request to please guide me. Thanks and Regards, Rizwanur Rahman

Ans: Taxability of income will depends on several factors like residential status, business connection in India, DTAA benefit (if available), technical knowledge involved and availability of certain prescribed documents.
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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Ramalingam

Ramalingam Kalirajan  |8462 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 26, 2024

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I have been allotted a Plot by authority on 25.05.2016 with a circle rate of ? 15,620.00, and i have been deposited the total amount ? 18,74,400.00 with the Hone Loan of ? 10,00,000.00. Further, authority has given me the letter in March 2024 to register the plot and pay the other charges like, Lease Rent One time, Location Charges, Sewer, Water Connection, Registration Charges etc. I have deposited all the charges of total = ? 3,37,242.00 and get registered with stap duty of ? 1,53,000.00 on 17.06.2024 and taken the possession on 18.11.2024. My total expenditure on the plot comes to ? 23,64,631.00 (Including Stamp Duty). I am planning to sell this plot on amount of ? 33,00,000.00 with the revised circle rate of ? 25,900.00. What are my tax liabilities in this transaction (LTCG or STCG) and any suggestion for exemption.
Ans: To determine your tax liability for the sale of the plot, let’s break down the situation:

Important Details from Your Case
Date of Allotment: 25-May-2016.
Date of Registration: 17-Jun-2024.
Date of Possession: 18-Nov-2024.
Total Cost of Acquisition: Rs. 23,64,631 (including stamp duty).
Sale Price: Rs. 33,00,000.
Circle Rate: Rs. 25,900 per square metre (revised from Rs. 15,620 per square metre).
The total holding period and your choice of taxation method will determine whether you incur LTCG (Long-Term Capital Gains) or STCG (Short-Term Capital Gains) and the corresponding tax liabilities.

Is the Gain Long-Term or Short-Term?
The date of allotment (25-May-2016) is generally considered the purchase date for real estate. Since you are selling the plot after holding it for more than 36 months (over 8 years in your case), your gain qualifies as Long-Term Capital Gain (LTCG).

Calculating the Capital Gains
Sale Price: Rs. 33,00,000.

Cost of Acquisition: Rs. 23,64,631.

Capital Gain: Rs. 33,00,000 – Rs. 23,64,631 = Rs. 9,35,369.

Taxation Options for LTCG (as per the updated rules for sales after 23-Jul-2024):

Option 1: Tax at 12.5% without indexation.

Tax = 12.5% of Rs. 9,35,369 = Rs. 1,16,921 (plus applicable cess and surcharges).
Option 2: Tax at 20% with indexation.
Indexed Capital Gain = Rs. 33,00,000 – Rs. 31,15,434 = Rs. 1,84,566.
Tax = 20% of Rs. 1,84,566 = Rs. 36,913 (plus applicable cess and surcharges).
Choosing the Better Taxation Option
Option 2 (with indexation) is clearly more tax-efficient in this case.
You will pay a lower tax of Rs. 36,913 instead of Rs. 1,16,921 under Option 1.
Suggestions for LTCG Exemption
To further reduce or eliminate your LTCG tax, you can explore the following exemptions under the Income Tax Act, 1961:

1. Section 54F: Invest in a Residential Property
If you use the sale proceeds to purchase or construct a residential property, you can claim exemption under Section 54F.
Conditions:
You must not own more than one house property on the date of transfer.
The new property must be purchased within one year before or two years after the sale, or constructed within three years.
The entire sale consideration should be utilised to claim full exemption.
2. Section 54EC: Invest in Specified Bonds
Invest up to Rs. 50 lakhs in NHAI or REC Capital Gain Bonds within six months of the sale.
The investment is locked in for five years and offers a safe, tax-saving option.
3. Capital Gains Account Scheme (CGAS)
If you cannot immediately utilise the sale proceeds, deposit them in a CGAS account before the filing deadline.
This allows you to keep the exemption intact while planning future investments.
Final Insights
Your plot sale qualifies for LTCG tax. The 20% with indexation option significantly reduces your tax burden.
To minimise tax, consider reinvesting under Section 54F or 54EC.
Consult a Certified Financial Planner or tax expert for tailored advice on reinvestment options and compliance with timelines.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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