Need help

Dear Madam,

This refers to our earlier discussions on 16th Sept 2017. We have sold the land at Rs. 30,00,000/- Can I invest Rs. 20,00,000/- in REC bond and remaining Rs. 10,00,000/- can i use it to my sister marriage. Is budget 2018 will be any help full to me in this regard to save tax.
Asked 20 days ago in Capital Gains Tax from Bangalore, Karnataka
Hi,

Sorry to say that I am not aware of the previous discussions held on 16.09.2017. However, please note that budget 2018 shall be effective only from 01.04.2018.

Further, please note that to save the tax on Capital Gains, you need to invest only the amount of Capital Gains in REC bonds and not the full consideration u/s 54 of the Income Tax Act.

Hence, since you said that land was sold at Rs. 30 Lakhs, capital gains arising out of the same would definitely be less than Rs. 30 Lakhs. You have to calculate applicable Capital Gains and invest the same in REC Bonds. Rest of the money you can use the way you want.

I hope your query is clear.

Feel free to revert for any further clarification.

Regards,
CA. Sunny Thakral
Sunny Thakral
CA, Delhi
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Sorry, no relief for you in the budget.
Instead, the holding period of bonds has been increased to 5 years now And not 3 years.

Have you sold the land?

Please get the calculation of capital gains for in order to know how much amount needs to be invested in bonds.
Lakshita Bhandari
CA, Mumbai
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Budget 2018 is not helpful in saving tax in this case in any manner.
Bharat Poplani
CA, ZIRAKPUR
18 Answers
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  Talk to Bharat Poplani
Unfortunately there is no benefit in the current Budget in this regard. Also note that the new budget is effective from 01.04.2018.
You can invest the Capital Gains in Specified bonds u/s 54 to claim relief from Capital Gains tax.
Nikhil Khanna
CA, Mumbai
122 Answers
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Hi,

Presently it is 3 years only. 

Regards 
Sunny Thakral
CA, Delhi
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At present date it is 3 years.

Please note that the investment in bonds has to be done within 6 months of sale of land or building.
Lakshita Bhandari
CA, Mumbai
894 Answers
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Currently it is 3 years. So please go ahead and invest in this financial year itself,
Nikhil Khanna
CA, Mumbai
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REC Bonds issued now (i.e till 31-Mar-18) will have 3 Years Lock-in period. However, for any further REC Bond issue on or after 1-Apr-18, the lock-in period will be 5 Years
Pradeep Bhat
CA, Bengaluru
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Hi,

There is no benefit in the current Budget in this regard. Also note that the new budget is effective from FY 2017-18.

Abhishek Dugar
CA, Mumbai
2349 Answers
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It is 3 years for REC bonds. On Rs.10 lacs you need to pay Capital gain tax.

Regards
CA Vivek Arora
7060029944
Vivek Kumar Arora
CA, Delhi
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For you it will be 5 years as the property sold is in Previous AY.
Sourabh Pahuja
CA, Delhi
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At present, the holding period is for a minimum period of 3 years. As per the proposed amendment in the budget 2018, wef !st April 2018, the period will be 5.
Siddharthh Jain
CA, Gurgaon
12 Answers
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If your LONG TERM CAPITAL GAIN upto RS 20,00,000 then you can use rest RS. 10,00,000 without any payment of tax since you are eligible for tax exemption for investing of amount in REC bonds.
No, Budget 2018 doesn't be applicable on your assessment year & it will not bring any benefit to you.
at now it's REC bond investment is  3 years only.
Thanks & Regards
Shiv Kumar Agarwal
CA, Delhi
245 Answers
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you will need to take the Indexation benefit and check the actual Capital gains on the date of sale. You can get the Fair market value done as on 01.04.2001 and then indexation can be done to compute the Capital gains.
However just to give you an idea and if we were to purely go with the indexation then the computation would be as follows:
Since the land was bought in 1995 at 100000, the indexed cost of the same in 2017 would be 1125/259*100000 = 434363.
 (Indexation numbers used from http://wealth18.com/cost-inflation-index-chart-table-1981-to-2014-for-income-tax-capital-gain-purpose/)
So the Capital Gains for you will be 3000000-434363= 25,65,637

So you will have to invest this amount to get exemption from paying tax. But advise is getting the FMV done will help you to reduce the capital gains even further.

Hope this clarifies,
Nikhil Khanna
CA, Mumbai
122 Answers
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Dear Sir,

As the land had been purchased before April 2001, please get the Fair Market value of the land done from the registered valuer as on 01.04.2001 and then apply the indexation on the fair market value to calculate the capital gain on the sale of land. You need to invest the amount of capital gain in the REC bonds for 3 years. Budget 2018 will be applicable for transaction done in F.Y. 2018-19. Fair market value will be substantially reduced capital gain and will leave maximum amount in your hand for sister's marriage.

Thanks
Vivek Kumar Arora
CA, Delhi
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Hi,

Could you provide the valuation as on 01st April 2001 to provide you the exact calculation.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
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The FMV of the land as on 1.4.01 shall be indexed to the year of sale. This would become cost of acquisition of property.
You need to invest the capital gain amount I.e. sale proceeds less cost of acquisition calculated above.
Lakshita Bhandari
CA, Mumbai
894 Answers
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What was the area of the land sold?

If the land sold was 1 acre with value of 8 lacs on 1.4.01, it's indexed cost of acquisition shall be 21.76 lacs in the FY 17-18. 
If it is sold for 30 lacs, capital gains would be 8.24 lacs. Thus 8.24 lacs shall have to be invested in bonds.

THE INVESTMENT IN BONDS HAVE TO BE DONE WITHIN 6 MONTHS OF SALE.
Lakshita Bhandari
CA, Mumbai
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Also, approximation won't work.

Please get a valuation done. Or, know the ready reckoner rate of your area.
Lakshita Bhandari
CA, Mumbai
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Dear Sir,

What is the total area?
Vivek Kumar Arora
CA, Delhi
157 Answers
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8lacs per acre of land would mean how much for your land?
How many acres of land did you sell? Was it one acre?
Nikhil Khanna
CA, Mumbai
122 Answers
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Hi,

Assuming the Fair Market Value of the property in 2001-02 was Rs. 1 Lakh:

As per the information provided by you, the cost of property in 1995 is Rs. 1 Lakh. Adjusting for cost inflation index for 2001-02 as 100 and for FY 2017-18 is 272. Hence the cost of flat shall be considered as 2.72 Lakhs and sale is Rs 30 Lakhs.

As such your capital gains appears to be 30-2.72 which is 27.28 Lakhs. Hence the amount required to be invested into REC or into another property shall be Rs. 27.28 Lakhs.

However, if you can justify that Fair Market Value of the property in 2001-02 was more than Rs. 1 Lakhs (that is by way of valuation). You can reduce the amount of capital gains.

Hence, please get the valuation or fair market value of the property in 2001-02 done.

Regards,
Sunny Thakral
CA, Delhi
106 Answers
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Considering the value of your land as 8 lacs as on 1.4.2001, your capital gain will be 8.24 lacs.

Hence, you need to invest 8.24 lacs in REC bonds to save taxes.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
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Hello,

Please provide the 
date of purchase :
Value of Purchase :
Value of the property as on 01st April 2001 :
Sale Consideration :
Date of Sale :

Rohit R Sharma
CA, Mumbai
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Hi,

We will require the value of the entire property, not the per sq ft rate. From your question above, it appears that the sale consideration is Rs. 30 lakhs. What was the value of the entire land / property as on 1 April 2001?

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
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By your input, indexed cost of acquisition comes out to be 391680 only which means the capital gains would be 2608320.

The capital gain amount I.e. 2608320 needs to be invested in bonds in order to exempt capital gain.
Lakshita Bhandari
CA, Mumbai
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hi,

If the Rate in 2001 is =120 per sq ft or 1200*120= Rs. 1,44,000

Assuming you sold the land on 01.04.2017, the Indexed cost will be = 144000*272/100 = Rs. 391680

Capital Gains = 3000000-391680 = 26,08,320

So you will need to invest Rs. 26.08 lakhs to get exemption from the capital gains tax.
Nikhil Khanna
CA, Mumbai
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Hello,

As per the details provided by you, it appears that the approx Indexed Cost of Acquisition is Rs. 391,680/- which makes your Capital Gain to be Rs. 26,08,320/-.

So in order to pay Zero Tax you will have to invest Rs.26 Lacs in the Capital Gain Tax Saving Bonds within 6 months from the date of sale. If 6 months have already passed, then you cannot take benefit under this scheme.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Rohit R Sharma
CA, Mumbai
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Dear Sir,

Capital Gain would be Rs.26,08,320/-. Investment in REC or NHAI or any other bonds notified by the govt.Lock in period would be 3 years. What is your other income?. Is the property was in your name or joint property?. If the other income falls short of the maximum exemption limit, the balance would be deductible from capital gain.

Thanks
Vivek Kumar Arora
CA, Delhi
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