• Sell of plot of land inherited or gifted by father

A) For sell of inherited property (land) held for 2 years +, what are tax implications? 
b) Planning to invest entire sell proceeds to purchase another property within one year. Do I have to pay any tax? 
c) If yes to above, how can it be avoided? Please advise ways. 
d) Is the government valuation of the land(plot) taxed if invested within one year. 
e) Do I get into tax if purchaser party of my land (plot) transfers the sell proceeds directly to party from whom I am purchasing a property (flat)? 
Please advise ways to save tax 
Thanking you, 
Regards
Asked 4 months ago in Capital Gains Tax from Tezpur, Assam

If it has been held for more than 2 years it will be a long term capital gain so tax would be chargeable @20% and you can take benefit of various exemption section.

If you purchase another land you won't save any tax.

You can avoid by eitgei investing capital gain in bonds or sale proceeds in purchase or construction of flat.

If you are purchasing flat then you can save entire tax. No tax even if entire sale proceeds is transferred to the seller of flat. But you need to deduct his TDS if amount of flat is above 50 lakh.

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
2291 Answers
19 Consultations

5.0 on 5.0

Hi

If it's agriculture land situated in rural area then it's tax free. Otherwise below mentioned conditions will apply. 

A. Long term capital gains will arise on its sale. 

B. No, exemption. An be claimed under sec 54F in these case. 

Sec 54f- full sale proceeds to be invested in new residential property, within 2 yrs from sale or can construct within 3 yrs. You should not hold more than one property on date of sale. 

Investment under sec 54ec can also be done. Maximum limit under this sec is 50 lacs. 

D. No

E. Sale proceed should route to your account, because payment details is to be mentioned in sale deed. 

 

Hope it helps 

 

 

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1. It would be treated as long term capital assets.

The capital gain would be taxable@ 20% plus applicable surcharge and cess.

 

2.If you are investing the amount in another residential property then there would be no tax liability.

 

3.You can save the taxes either by reinvesting the entire sales consideration amount in new residential property or by reinvesting in 54ec bonds. 

 

4.Yes, you will have to pay the taxes.

 

5. Yes,  the capital gain tax liability would also arise on said arrangements because you are transferring the rights in property. It will be treated as transfer of capital assets

 

Payal Chhajed
CA, Mumbai
3244 Answers
41 Consultations

5.0 on 5.0

Capital gain is the difference between sale price and indexed cost of acquisition.

If you are going to purchase flat within 2 years then you need to deposit it in capital gain account scheme of government and open such account with public bank before filing your return of income to save capital gain tax.

If you don't know much about capital gain it would be better if you have a telephonic conversation and clear things out.

Naman Maloo
CA, Jaipur
2291 Answers
19 Consultations

5.0 on 5.0

Dear Sir,

 

Simply put, any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain.

 

To calculate the capital gain & 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.

 

-If you have not been able to invest your capital gains until the date of filing of income tax return (usually 31st July) of the financial year in which you have sold your property, you are allowed to deposit your gains in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. And in your return claim this as an exemption from your capital gains, you don’t have to pay tax on it. However, you must invest this money you have deposited within the period specified by the bank, if you fail to do so, your deposit shall be treated as capital gains.

Payal Chhajed
CA, Mumbai
3244 Answers
41 Consultations

5.0 on 5.0

Hi

 

A. Such sale would attract long term capital gain taxes.

 

B. To avoid capital gains, you may invest the sale proceeds info another residential house property within 2 years of sale of construct a new residential house property withing 3 years of sale. If such reinvestment is made, no taxes shall be payable.

 

C. You need to show such capital gain computation in ITR and claim exemption under 54F. If the amount is not invested up to due date of return filing, it has to be deposited in capital gain deposit account.

 

D. No.

 

E. No issues. Exemption shall be provided.

Lakshita Bhandari
CA, Mumbai
3848 Answers
190 Consultations

5.0 on 5.0

1. Capital gain would be sale proceeds less indexed cost of acquisition. Since it's an inherited property, cost for the person from whom you have inherited the property shall be considered.

 

2. That is fine. You need to show it in ITR. Amount of sales proceeds have to be deposited in capital gain deposit account and not in a regular savings bank account.

 

We may discuss the issues further.

Lakshita Bhandari
CA, Mumbai
3848 Answers
190 Consultations

5.0 on 5.0

Hello,

 

A. In case of inherited property, holding period of the property of your father and yourself bothe would be considered. So it should be Long Term Capital Gain. 

B&C. If you purchase (within 2 years) or construct(within 3 years) another house property from the amount of sale consideration, then the capital gain would be exempt u/s. 54F.

D. Sale consideration would be the actual sale consideration or stamp value whichever is higher. It would be reduced by the indexed cost of acquisition, the resultant would be capital gain which would be taxable at 20% plus cess, if not invested as per Sec. 54F.

E. Yes.

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1136 Answers
3 Consultations

5.0 on 5.0

1. Capital Gain is Sale consideration minus the indexed cost of acquisition and improvement and transfer expenses if any.

2. If you are planning to invest as per Sec. 54F in another house property in 1-2 years, you need to deposit the amount in Capital Gain Savings Account.

 

Hunny Badlani
CA, Madhya Pradesh
1136 Answers
3 Consultations

5.0 on 5.0

Dear Sir,

 

You will have to reflect the capital gain amount in ITR and claim the exemption while filing ITR.

Payal Chhajed
CA, Mumbai
3244 Answers
41 Consultations

5.0 on 5.0

Yes, if you are investing whole sale consideration before July 2020, then you need not deposit it in the capital gain savings account.

While in the ITR, you will have to show capital gain but it would be exempted by specifying that you have invested as per Sec. 54F before 31st July.

 

 

Hunny Badlani
CA, Madhya Pradesh
1136 Answers
3 Consultations

5.0 on 5.0

Even if you purchase the flat before filing your return of income you need to show such capital gain income in your return of income and claim exemption u/s 54 otherwise you may receive notice for not disclosing such income.

 

Even if such income is not liable to tax but you need to declare it as the officer will check whether claim made by you is correct or not.

Naman Maloo
CA, Jaipur
2291 Answers
19 Consultations

5.0 on 5.0

Hello Sir,

 

Even if you are reinvesting the whole amount in new property before filing return, you need to show the details of property sold.

 

You will have to calculate the capital gain amount and mention the capital exemption amount u/s 54F while filing return of income.

 

Irrespective of the amount gained or lost, one must disclose capital gains or losses while filing ITR.

 

Please not that failure to report any information amounts to concealment of income and is liable for stiff penalties. 

Karishma Chhajer
CA, Jodhpur
1375 Answers
8 Consultations

5.0 on 5.0

No. If you are investing the amount before 31st July 2020, you don't need to deposit in capital gain deposit account. But, in ITR for FY 19-20, capital gain calculation has to be mentioned and relevant exemption is to be claimed.

Lakshita Bhandari
CA, Mumbai
3848 Answers
190 Consultations

5.0 on 5.0

Hello,

 

The formula is correctly understood.

To calculate the indexed cost of acquisition, you need to first get the valuation report as on 1st April 2001 from a certified valuer. This value will be deemed as cost of acquisition as on 1st April 2001 and then it would be indexed.

For indexation, you will have the following formula, cost as on 1at April 2001 / index of F.Y. 2001-02 * index of F.Y. 2019-20.

Index of F.Y. 2001-02(base year) is 100 and inflation index for FY 2019-20 is yet to be announced. It would be around 288.

For indexing the same formula would be used, base year would be 2016-17. Index of F.Y. 2016-17 is 264.

The transfer would also be indexed. For indexing the same formula would be used, base year would be 2017-18. Index of F.Y. 2017-18 is 272.

The above-indexed costs would be deducted from the sale consideration, the resultant figure would be your capital gain. No other method would be used as per income tax law.

 

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1136 Answers
3 Consultations

5.0 on 5.0

Dear Sir,

 

Dear Sir,

 

Hope you are doing well !!

 

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

 

So, firstly you need to get the valuation report of property as on 01.04.2001.

 

After that you can calculate the indexed cost of acquisition, the following formula is to be used:

 

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.

 

Cost of development would be considered as cost of improvement.

 

You can take the benefit of indexation on cost of improvement. 

 

To calculate the indexed cost of acquisition, the following formula is to be used:

 

Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation

index of the year of improvement.

 

If you need any further assistance, you can take a phone consultation for detail discussion. 

 

Payal Chhajed
CA, Mumbai
3244 Answers
41 Consultations

5.0 on 5.0

Is it a rural agricultural land?

No you cant assume current circle rate as cost of acquisition.

You need to get its valuation done by government approved valuer for 01.04.2001.

If you have proper bill of all cost you can claim them.

No you wont have to pay capital gain on entire sale consideration. If you really need help I would suggest you to have a phone consultation so that I can solve all your queries in once.

 

Thank you

Naman Maloo
CA, Jaipur
2291 Answers
19 Consultations

5.0 on 5.0

Hi

 

Since your father was holding the property in 2001, the value as on 1.4.01 needs to be taken as cost of acquisition. Such cost of acquisition shall be indexed from 2001 till the year of sale.

 

The value as on 1.4.01 can be taken as stamp duty value / ready reckoner rate or a valuation could be done by a registered valuer.

 

All expenses incurred would be treated as cost of improvements and shall be indexed from the year of improvement till the year of sale. You must possess proper proofs of such improvements.

Lakshita Bhandari
CA, Mumbai
3848 Answers
190 Consultations

5.0 on 5.0

Hello Sir,

 

In respect of capital asset acquired before 1st April, 2001, the cost of acquisition will be higher of the actual cost of acquisition of the asset or fair market value of the asset as on 1st April, 2001. 

 

It is advisable to get the FMV/ valuation of the jewellery as on 01.04.2001 done from the registered valuer.

 

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

 

-Cost incurred by you for development of the plot is 2.5 lakhs in 2016 would be treated as improvement cost.


- Indexation benefit is available for cost of acquisition as well as cost of improvement.


You can calculate the capital gain with the help of below link:

https://www.incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

 

Karishma Chhajer
CA, Jodhpur
1375 Answers
8 Consultations

5.0 on 5.0

Hello Sir,

 

If you need any further assistance, please let me know.

Karishma Chhajer
CA, Jodhpur
1375 Answers
8 Consultations

5.0 on 5.0

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