• LTCG tax liability from sale of land and options to save tax

Hi there,

I am planning to sell off one of my lands (non agriculture) next month. I need expert advise. Following are the additional details:
1.Land purchased in 2007. Property location Odisha, I am the sole owner.
2.Additional expenses: Agent fees, boundary construction/maintenance and security
Note: I don't have any proof for expenses mentioned in # 2.
3. I already own more than 1 residential property in my name.

Questions:

1.What all expenses (actual and indexed) can be deducted while calculating LTCG from this sale proceedings?
2.What is my taxation liability : Is it 20% of LTCG or sale proceedings?
3.What are my avenues to save tax ? Do I have to stick to one of investment options or a combination of options i.e. purchase of a new housing property (if at all this is an option) as well as special bonds? For tax savings do I need to consider only LTCG or sale proceedings?
4.Can I offset the LTCG against LTCL (loss) from sale of mutual fund holdings or sale of another hosing property? If yes how soon the second transaction needs to be completed from the date of of completion of the first transaction? 
5. Assuming I am going to go far tax saving options, would I be able to claim back the 1% TDS which the buyer would have already deducted?
Asked 5 years ago in Capital Gains Tax

Hi,

Hope you are doing well !!

1. Deduct the following:

Expenditure incurred wholly and exclusively in connection with such transfer

Indexed cost of acquisition-

Indexed cost of improvement-Cost of improvement is the capital expenditure incurred by an assessee for making any addition or improvement in the capital asset. It also includes any expenditure incurred in protecting or curing the title. In other words, cost of improvement includes all those expenditures, which are incurred to increase the value of the capital asset.

2. It is 20% plus applicable surcharge & cess of LTCG.

3. In order to claim the exemption under section 54F which covers long-term capital gains on assets other than residential house, you should not own more than one residential house other than the one you are acquiring on the date of sale of the other asset. So in case you own more than one house on the date of sale of the asset except the house in which you are investing the long-term capital gains, you can not avail the capital gains tax exemption by investing in a residential house under section 54F.

Now, you can claim tax exemption by investing long term capital gain amount in Specified Bonds, such as those issued by NHAI and REC, which are redeemable after 5 years, provided the capital gains are invested within 6 months from the date of sale of your residential house.

4. The Income Tax does not allow Loss under the head Capital Gains to be set off against any income from other heads – this can be only set off within the ‘Capital Gains’ head. Long Term Capital Loss can be set off only against Long Term Capital Gains.

Yes, you can offset the LTCG against LTCL (loss) from sale of mutual fund holdings or sale of another hosing property. If you are not able to set off your entire capital loss in the same year, both Short Term and Long Term loss can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed.

5. Yes, you can claim the same. This will also reflected in form 26AS.

In order to avoid any mismatch, please file the ITR as per form 26AS.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

1. It is very difficult to claim expenditures without proofs.

However, you can use your bank statement as a proofs only if you have made the payments through banking channel.

2. You need to invest only capital gain amount to take the benefit of section 54EC.

Only for section 54F-To claim full exemption the entire sale receipts have to be invested.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

1. Yes, all expenses which are directly related to transfer (actual and indexed) can be deducted while calculating LTCG from this sale proceedings subject to sufficient proofs.

2. It is 20% of LTCG.

3.You can save the taxes by investing in 54EC bonds.You need to invest in these bonds within 6 months from when the capital asset was transferred. The maximum amount of capital gains that you can invest in these bonds is Rs 50 lakh. 54EC bonds come with a lock-in period of 5 years (effective from May 2019) and are non-transferable.

4.Yes, you can offset the LTCG against LTCL (loss) from sale of mutual fund holdings or sale of another hosing property. Unadjusted losses can be carried forward and set off against gains for up to eight financial years.

5. Yes, you can claim the TDS credit in next FY.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

1.No, you won't be able to deduct them without sufficient proofs.

2.Only LTCG amount.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

1 since you are not having the proof of any expenses you can't claim it, unless you get a notarized statement of the person who constructed that boundary wall that he received such payment and he has shown it in his income.

2 tax liability is 20% of ltcg and not sale proceeds.

3 you can use combination of 2-3 options, since you have only one house you can invest in another property under section 54F or invest in bonds under section 54EC.

4 yes you can offset ltcg from ltcl but it should be within same financial year.

5 obviously you would be able to claim the 1% TDS deducted irrespective of what capital gain you show the only thing is to show proper capital gain income.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Hi,

Please find below the response to your queries:

1. All expenses which are directly related to transfer can be deducted while calculating LTCG. However, you should have valid proof of expenditure in order to be eligible for deduction.

2. 20% of LTCG.

3. You can save taxes by investing in capital gains bonds u/s 54EC within 6 months from the date of sale. You cannot claim exemption u/s 54F as you are already holding more than 1 residential property.

4.Yes, you can.

5. Yes, you can claim the same.

Regards,

Nikhil

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi,

You will need proof for the expenditure you claim. If you have used banking channel to make the payments, you can use your bank statement as a valid proof else it is difficult to claim the same.

For availing exemption u/s 54 EC, you need to invest only the capital gains amount.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi,

1) Cost will be actual cost of acquisition as per sale deed. You can add the agent fees and maintenance expenses as they are feasible and supported by some judgements.

2) It is 20% of LTCG.

3) It will depend on the amount of capital gain. It is upto you whether to go for one option or both the options. In case of bonds, you need to invest capital gain and in other case it will be net consideration.

4) Yes you can off-set them. LTCL can be carried for ward for eight assessment years.

5) TDS credit will be available irrespective of investment.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA