My aunt got a share in a commercial plot/ theatre in the year 1990 as a joint property between 4 partners through her parents long after her marriage.her husband expired recently. Later the theater got closed for several years and subsequently the land acquired commercial value and sale deal was finalized.she gets around 1 crore with this deal. she never filed ITR before,but has PAN. Now what is the tax implications of above deal.how to mitigate tax implications. can she gift the sale proceeds to her two daughters & son to avoid taxes. want a detailed answer please. srinivasa rao
Hi
Your aunt shall be liable to pay capital gain taxes.
In order to reduce the tax liabilities on capital gains, she may invest the proceeds into a residential house property or section 54EC eligible bonds.
She may nominate her children in the investment.
However, if she transfers money to her children, she will have to pay capital gain taxes.
Yes she will have to pay capital gain but that would depend on the value of property as on 01.04.2001 as the property was purchased before this date. So all the partners need to first get it's valuation done for that date and then based on that value we'll calculate the capital gain and she need to pay capital gain tax @20% on that amount.
No she can't save tax by distributing the sale amount but she can save tax by investing the amount in new residential flat or by investing the capital gain amount in the bonds mentioned under section 54EC and distributing the remaining amount between her children.
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 !!
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.
Accordingly, she will be liable to pay the capital gain taxes.
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.
Exemption from long term capital gains
She can claim an exemption from LTCG, under section 54F 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.
Capital Gains Account Scheme (CAGS): if she does not get a chance to invest in a profitable property immediately and still want to save her long-term gains from being taxed, she can invest her capital gains in CGDAS by approaching any public sector bank. The timeframe for the purchase or construction of the property remains unchanged in this case as well. But she can utilise this account momentarily so that she saves her gains from being taxed and have more time to finalise a property for reinvestment.
It is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond due date for furnishing return of income.
Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry.
- No, even if she transfers the money to children,she still needs to pay the capital gain taxes.
Hello,
She would be liable for tax on the capital gain. Transferring sale proceeds to her children won't save any tax.
To get an exemption from capital gain she can either invest the sale proceeds in a new house property u/s. 54F or invest in specified bonds u/s. 54EC.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
Hi,
- First she needs to calculate the actual capital gain earned by her.
- Exemption would be available for capital gain and that too for investment in residential house property and investment in bonds.
Thanks
