We have got ancestral property in mangalore karnataka , the property(house with land) was transferred to my father as gift from my grand father (year 1965) , later on the property he scarped the old house and built a new house (1985) , now we are about to sell the whole property (land and new house). this will be decided into 5 parts (relation). - Approx 1 cr.) Q1. How much tax we are liable to pay ? whats the calculation Q2. what are the various option in of saving on tax. Q3. shall we pay the tax first and distribute the share or distribute the share and then individuals pay tax.
- Get the FMV of the property as on 01.04.2001 and then compare it with the actual cost incurred. Index the cost which is higher and deduct from the net sale consideration.
- You need to invest either in new house or specified bonds (upto Rs.50 lacs)
- Distribute the share first and then each individual is liable to pay tax.
You need to first get a valuation report of such land and house showing its fair market value for 01.4.01.
Then only we can do the calculation of Capital gain.
Even though you are going to distribute it in 5 parts since the property is in name of your father he needs to pay tax.
Various options to save tax are to either invest capital gain amount in another house property within next 2-3 years or invest in bonds mentioned under 54EC i.e. nhai bonds within six months.
Yes first pay tax and then give gift.
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 an asset is acquired by gift or inheritance, the period of long term capital asset shall be reckoned from the date when the previous owner acquired such asset and the indexation shall be allowed accordingly from the year of acquisition by the previous owner. The same method is applicable for cost of acquisition.
To calculate the long-term capital gains tax payable, the following formula is to be used:
Long-term capital gain = full value of consideration received or accruing – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where:
Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.
Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement
Firstly you need to get the valuation report of property as on 01.04.2001.
You 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, you 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.
You can call me further assistance.
Dear Sir,
1. Your property is Long term capital asset. My suggestion is to sell the property bearing each person name as seller in sale deed. If its in one person name better to divide it.
2. Value of the acquasition will be Fair market value of property as on 01/04/2001. And the gain will be computed accordingly.
3. You have got 2 options to save the tax.
a) Section 54: Buy or construct new residential house.(Buy before 2 years from date of transfere or construct )
b) Section 54ec: Invest in specified bond. (Within 6 month from the date of transfer of property).
(Max Investment -50L).
Hi,
1. Obtain a valuation report for determination of FMV as on 1.04.2001. Index the higher amount of FMV (or) cost of acquisition of the previous owner. Deduct the same from the sale consideration. The balance is taxable.
2. Invest in another residential property either by purchasing/construction as per section 54. If purchase option is chosen, purchase it within 1 year before the transfer or within 2 years after the transfer. If construction, amount must be invested within 3 years from the date of transfer.
Alternatively, invest in 54EC bonds (REC, NHAI, PFC and IRFC) upto 50lakhs within 6 months from the date of transfer.
3. Distribute the share first and then individuals pay tax.
Call me in case of detailed computation of capital gains or any further assistance.
Hello,
1. You need to get the valuation done of the house as on 1st April 2001, this will be considered as your cost of acquisition. Now from the sale consideration, deduct the indexed cost of acquisition as per cost inflation lndex chart. The resultant would be your Long Term Capital Gain. This would be taxed @20.4%.
2. You can invest in a new residential property or purchase specified bonds within a specified time period to save capital gain tax.
3. Distribute the share first, as every individual will be taxed separately, proportionately to their share in the property.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
thanks for answers , there are mix of advice on distributing first/later , what are the implications ? - I learned if my father pay tax and give the money as gift to us then we do not have to pay tax - is it right.
Yes thats right
yes it is right.
Sir ,
Selling in Individual Name: Tax should be discharged individually. Assessee can buy a single residential property . Or invest in specified bond.
Selling in joint name: Each of the assessee should discharge tax on his portion gain. They will get option either to choose 54 or 54ec individually.
Hi
Yes your understanding is correct,You dont have to pay tax on money gifted from your father.
Hope it helps
Yes, it is right.
Yes, it is right. Money gift between relatives is exempt as per income tax.
If your father alone owns the property, he would be liable for the whole capital gain tax and then he will distribute the share, which would be exempt as transfer between relatives as per income tax.
If all own the property, each one of you would be liable for capital gains tax on your proportionate share. This would fetch slab rates benefits for each one.
Regards,
CA Hunny Badlani
Hi,
1. You need to get the property value as on 1.4.2001 from registered value or take stamp duty rate of the property.
2. Multiply the above value by capital gain factor (current its 2.82 for FY 2018-19, For FY 2019-20 it's yet to be released.
3. Deduct step 2 value from sales consideration to arrive at capital gain.
4. Divide capital gain amongst five members.
5. Pay tax at the rate 20.8% plus surcharge on step 4 value.
