Investment in capital gains

Investment in capital gains

1 I sold my house in August 2019 for 57 lacs.in jammu I acquired the house in 2011from my father through family settlement. No value paid

What would be my capital gains or how to calculate capital gains.
2 . If I want to purchase flat and the possession is after more than 3 years can I invest to save capital gains tax.
What is the last date to open capital gains account as I have not opened the same till date.
Can I purchase house jointly with wife ,single or wife only to save capital gains tax
Possession or allotment or registry which is must

Asked 5 years ago in Capital Gains Tax

Hope you are doing well !!

When a person inherits/(family settlement) ancestral property, no tax liability arises at the time of inheritance, as India does not levy an inheritance tax at present. However, in case the inheritor decides to sell the inherited property, any capital gains earned on the sale will be taxable in his or her hands.

The capital gains taxability in respect of property depends upon the period of holding.

Remember that, in case of inherited property, the aggregated period of holding is not counted from the date it was inherited by the seller, but from the date of purchase of property by the original owner who actually purchased the property.

If the property has been acquired by the original owner (your father) prior to 1 April 2001, you have the option of taking the actual cost of acquisition or fair market value as on 1 April 2001 for calculating the indexed cost of the property.

It is advisable to get the FMV/ valuation of the property 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.

“Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer,"

1. Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date. Please share the details with us for exact capital gain calculation.

2.You can claim tax exemption on the gains made from the sale of a property. The first option is to reinvest the gains in another property. If the amount of LTCG is less than ₹2 crore, you can claim tax exemption by reinvesting the gains across a maximum of two new residential properties located in India. However, if the gains amount to more than ₹2 crore, you can only reinvest in one property to claim tax exemption. The investment has to be made within the specified time frames, i.e., within one year prior to the sale date or two years from the sale date or within three years for an under-construction property.

The second option is to use the gains to construct a house within three years from the sale of property.

A third option is to invest the gains in capital gains bonds under Section 54EC of the Income-tax Act. The total investment limit in these bonds is restricted to ₹50 lakh per FY.

We may assist you in capital gain calculation, valuation report,tax planning & entire procedure.

We have handled such cases before.

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed

CA, Mumbai

5189 Answers

303 Consultations

Talk to Payal Chhajed

Since you have received this house from your father without consideration. Hence to calculate capital gain I would require cost your father paid to purchase this house.

If the possession is after 3 year I won't suggest you to invest in such house as it would be litigative. 3 years would be from sale date.

Last date would be 30.11.2020

You can purchase single in your name or jointly.

Possession is must but if we get registry it would be better.

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

4303 Answers

101 Consultations

Talk to Naman Maloo

Hi,

The capital gain would be sales (57 lacs) minus the indexed cost of house. Assuming that house was purchased by your forefathers before 1 April 2001, Indexed cost of house will be determined by determining the value of the house as on 1.4.2001 and multiplying the same by 2.89

For determining the value as on 1.4.2001, you can take valuation certificate from a registered valuer or take fmv as on 1.4.2001.

You need to open cgds account before filing return if income (before 30 November 2020). you need to get possession of the house within 3 years from the date of sale.

Lakshita Bhandari

CA, Mumbai

5687 Answers

943 Consultations

Talk to Lakshita Bhandari

Taxation on the sale of inherited property is considerably different as compared to a sale of a property obtained through outright purchase.

Under Section 56(ii) of the IT Act, there is no Inheritance Tax applicable in India irrespective of the cost of the property you inherit.

When 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.

Further section 49(1) also provides that in such cases the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.

Thus the cost of acquisition as well as the cost of improvement by the previous owner of a capital asset shall be the cost of acquisition of such asset to the person selling the such capital asset acquired under gift or inheritance and the indexation shall be allowed from the year of acquisition or improvement by the previous owner.

So in your case if property purchased by your father before 2001 then fair market value or registered value as on 1 April 2001 will be consider as cost of assets then indexation will be done. Calculation of capital gain will be sale considerations less cost of transfer less indexed cost of acquisition less indexed cost of improvement.

For more details discussion feel free to call.

If you got possession after 3 year you may not get exemptions.

You must register the property.

Last date would of 30 November 2020 or actual date of return filling whichever is earlier.

Karishma Chhajer

CA, Jodhpur

2452 Answers

29 Consultations

Talk to Karishma Chhajer

Hello,

To calculate the capital gain, you would need the sale consideration i.e. Rs 57 Lakhs and cost of acquisition. The cost of acquisition, in your case, would be the cost of the house to your father. If your father acquired this house before 1st April 2001, then the Fair Market Value as on 1st April 2001 would be considered as your cost of acquisition. This cost of acquisition would be indexed until the year of sale using the cost inflation index. The net figure of sale consideration and indexed cost of acquisition would be your capital gain amount.

The last date to deposit the capital gain amount would be the due date of return filing i.e. 30th Nov. 2020.

I hope this answer satisfies your requirements. It would be advisable to consult a practicing CA. You can contact us directly or take a phone consultation.

Regards,

CA Hunny Badlani

Hunny Badlani

CA, Madhya Pradesh

2608 Answers

16 Consultations

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The cost of property to your father will be considered as cost and indexation will also apply for that year. If property was purchased by your father before 2001 then indexation for 2001 will apply and valuation will have to be done as on 1st April 2001.

Lat Date to open Capital Gain Account is 30th Nov. The construction should be completed within 3 years.

Buying the house in joint name is a litigative matter. it is better that the owner of the property sold becomes the title holder in the new house property.

Ruchi Goel Anchal

CA, Gurgaon

525 Answers

16 Consultations

Talk to Ruchi Goel Anchal

1) As you have got the property through family settlement, it is advisable to obtain FMV of the property as on 01.04.2001 and apply indexation on it till 2019-20.

2) To claim exemption it is mandatory to invest within 2 years from the date of the transfer.

3) last date to open CGAS is 30.09.2020

4) Yes you can purchase jointly with your wife.

5) Possession.

Vivek Kumar Arora

CA, Delhi

Available Now

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1140 Consultations

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Dear Sir,

As per the provision of Income Tax, Exemption u/s 54 by depositing the amount in specified bank can be claimed only if the amount is invested within 3 Years of Receiving the amount. If the amount is not utilised it is considered as Income and hence taxable.

Thanks and Regards

Shiv Kumar Agarwal

CA, Delhi

489 Answers

74 Consultations

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