Hi Experts, Need your advise on the below case I have a flat in bangalore which was purchased in 2009. During registration, the fair value mentioned was 19 lakhs. The flat was purchased with loan from SBI and I have been using this to claims deductions under repayment of principal and repayment of interest. I am now planning to sell the house as I moved out of bangalore. Can you please let me know what all can I do in order to reduce the capital gain tax ? The buyer would be taking over my pending loan and some additional amount along with it from the bank, so that much amount would be paid directly by the bank to me. Also, please let me know, how should I deal with the cash being transferred as well as the draft from the bank. Can I directly deposit it in my savings account ?
In the present case you can also claim interest paid on housing loan and deduct in order to arrive at capital gains tax. Even if you are claiming h. loan interest every year in your return of income then also you can claim thus to reduce your tax liability. There is case laws on the said subject.
In order to calculate tax liability it is better that you consult your nearest CA and do.
If the cash is mentioned in your deed then you can deposit in Account and not otherwise.
Hello Sir,
In order to save up on taxes you need to first calculate the Capital gains. You can invest the same in either a new residential property or invest the same in Capital Gain Tax Saving Bonds for a period of 3 years.
You can directly deposit the Draft that you will be receiving from the Bank for the Cash Component, it is advisable not to deposit the same in your Bank if it is not shown in your Sale Deed.
Trust this clarifies your query.
Feel free to get back/ call back for any further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Dear Sir,
Please find following answers:
1. For calculation of capital gain, we would require proper values of sale, purchase, improvement cost etc.
2. To reduce your capital gain you can invest in new residential property or specified bonds within the time prescribed.
In case you want to invest in residential property then you may transfer the amount in Capital Gain Account Scheme as applicable in your case.
Draft may be deposited in your saving bank account or in Capital Gain Account.
You can deposit cash if mentioned in the deed.
For any other query/clarification, feel free to contact.
Thanks you all for your answers. Ill be more specific. The flat was purchased in 2009 for 19 lakhs. Now im selling it for 35 lakhs, of which there is a pending loan of 6 lakhs. The buyer will be taking a loan of 25 from the same bank, ie he will be taking over the pending amount. after indexation the value of the property comes around 32 lakhs. so my effective gain is only 3 lakhs. please correct me if I am wrong. So i need to pay tax on 3 lakhs gain ? after deduction of 6 lakhs (loan), I will be getting only 29 lakhs (19 from the bank and 10 by cash), The sale deed would be made for 35 lakhs in total. So I can put the entire amount into my savings account, but can I use it for other purpose rather than reinvesting it on another property. I am planning to put that in FD for my daughter's future use. Also, the transfer of 10 lakhs as cash, will it cause an issue with IT dept ? Please advise.
Dear sir,
To calculate the correct capital gain we would need the month in which the property was purchased. if you have purchased the property in March 2009 the capital gain tax would differ and if you have purchased it in April 2009 capital gain will differ.
W.r.t the cash of 10lac same should be mentioned in the sale deed.
Further to avail exemption, if you don't want to invest in house property, you can invest Rs. 3 lacs (assuming the value of capital gain is RS. 3 lacs) in bonds of REC or NHAI.
Please let me know if you need further assistance on the above
Thanks and Regards
CA Abhishek Dugar
1. Sir you are correct in estimating that your gain will be 3 lakhs on which you need to pay tax of 20.60%.
2. For capital gains purpose you need to take stamp duty value or document value which ever is more. In the present case 35 lakhs is more thus the sale consideration to be taken is 35 Lakhs.
3. If you pay tax on 3 lakhs , then you can use the money for any purpose.
Dear Sir,
1. Yes you are correct in estimating your Long term Capital Gain of Rs.3 Lacs which will be taxed @ 20% plus cess. Asssuming that the sale value mentioned in the agreement is higher than the municipal value.
2. If you pay the LTCG tax, then you are free to use the proceeds in whatsoever manner you feel comfortable. In case you do not want to pay LTCG tax, then you may invest the CG in LTCG Tax Saving Bonds for a period of 3 years, post which you can use your funds.
3. Yes, feel free to use the Rs. 10 Lacs received in Cash, as that is a part of your Sale Consideration and forms a part of your agreement value.
Trust this clarifies your query.
Feel free to get back/ call back for any further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP