Sold 100 old Properties

You should find its FMV for 2001-02. and then find its capital gain amount by indexing the cost an if its house you have many option to save tax like investing capital gain amount in house or investing capital gain amount in bonds mentioned u/s 54EC.

This are the two options available with you. But first you need to check if you are liable to pay tax.

If you need any personal consultation you can consult me.

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

Thank you.

Dear Sir,

Hope you are doing well !!

Where a capital asset has been inherited, the period of holding of the capital asset by the previous owner also needs to be taken into consideration in computing the number of years of holding. 

In that case, any gains arising from this (sale consideration less indexed cost of acquisition and improvement) will be taxable as a long-term capital gain (LTCG).

Further, as this is an inherited property, the cost of the property for her would be the cost at which the property was acquired other than by inheritance.

As such date of acquisition falls prior to 1 April 2001, she has a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as her cost. 

So, firstly she needs to get the valuation report of property as on 01.04.2001.

Exemption from long term capital gains

She can claim an exemption from LTCG, under section 54 of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.

Alternatively and/or additionally, she can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.

Dear Sir, Such transaction amounts to Capital gain. But with proper tax planning we can reduce the tax liability to zero by claiming deduction under section 54 or 54EC of income tax act. Please let me know the transaction in details to give you detailed steps. 

Hello,

Since the property is held for more than 3 years, this income would be classified as Long Term Capital Gain and taxed at 20% after indexation. First, you will have to find its FMV (Fair market value) as on 1st April 2001.

Now you can calculate the capital gain amount, Sale consideration less Indexed Cost of Acquisition & Improvement(with the use of cost inflation index)

For Capital Gain Exemption, your mother can invest in another house property by either purchasing or constructing new house property within a specified time period under Sec. 54 or by investing in NHAI or REC Bonds under Sec. 54EC.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Hi

For calculation of the capital gains, the cost of acquisition of the original owner (from whom your mother inherited the properties) shall be required or the stamp duty value as on 1.04.01 if properties were acquired before such date.

For claiming exemption from capital gains, investment can be done in :

1. Residential house property under section 54: invest in a ready to move in property within 2 years of sale or purchase land and construct a house property within 3 years of sale.

2. Eligible bonds under section 54 EC: invest with 6 months of sale. Such bonds shall be redeemable after 5 years.

Please note that in order to claim exemption, you need to invest the capital gain amount if a house property is sold. However, in case of sale of a land, entire sales consideration needs to be invested.

Cost would be its FMV in 2001. It needs to be further indexed as per the Cost of inflation index issued by the government every year.

So sale price minus cost (indexed cost) will give you capital gains. [ Tax on Long term capital gain is at 20%].

Saving option -

1. Invest as per Section 54EC - invest in bonds. within six month of sale. [ it has holding period restriction]

2. Since you sold residential property, you can invest in another residential property & claim tax deduction provided your parent doesnt own any other home. [ you get 2-3 years time for such acquisition].

Hi

First you have to take Fair market valuation of property as on 01.04.2001.It will be cost of property.

Sales consideration minus cost will be long term capital gain,tax there on will be calculated @20.6%.

To save tax,Investment in another property can be done,within 2 yrs of sale ,for ready to move property and 3 years for  construction of  property .Further investment in bonds under sec 54EC can also be done.

You need to invest only capital gain amount.

Hope it helps

Hi,

- Get the FMV as on 01.04.2001 and calculate the indexed cost of acquisition. Deduct the indexed COA from the net sale consideration.

Thanks

Sir,

You need to take valuation report of the property as on 01.01.2001 and accordingly need to calculate the Index cost of property as on date.

Based on difference in index value and sale value capital gain shall be applicable.

In case of Capital Gain Applicability either you can reinvest the amount of capital gain into another residential property or can buy eligible bond of equivalent value.

The gains earned by her will be long term capital gains.  The capital gains would be sale price less the indexed cost of acquisition.  The cost would be the actual cost as incurred by the previous owner.  Since the property was bought before 2000, the Fair value as on 1 April 2001 may be adopted as a cost of the property.  Indexation is a cost inflation index which is notified by the Govt.  . It is done to adjust for inflation over the years. This increases one’s cost base and lowers the capital gains.

Capital gains earned by selling the property would be exempt from tax if such gains have been used for purchase within one year before or two year after the date of transfer of property or construction of a new house or has purchased a site and constructed a house thereon, within a period of 3 years after the sale of the original house.

If capital gains have not been invested until the date of filing of return (usually 31st July) of the financial year in which the property is sold, the gains can be deposited in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. This deposit can then be claimed as an exemption from capital gains, and no tax has to be paid on it. However, if the money is not invested, the deposit shall be treated as short-term capital gains in the year in which the specified period lapses.

The other option is to buy specified bonds issued by National Highway Authority of India or Rural Electrification Corporation.  There is a lock in period of 5 years post investment in these bonds. This investment is to be made in 6 months of sale of asset.

Hello Sir,

For capital gain calculation, you need to first get the valuation report of property as on 01.04.2001.

You can save the capital gain tax either by reinvesting the capital gain amount in new residential property or by reinvesting the amount in eligible bonds specified under section 54EC.