I acquired house from my father in 2011 through family settlement. My father had purchased the house in 1960 in jammu J&K. I sold my house in August 2019 to my brother for consideration amount of 57 lacs. Is there any capital gains. If there is capital gains then what are the options available to me right now..
- For calculation of capital gain we need cost of acquisition of the house. In your case, COA is actual cost in the hands of your father or FMV as on 01.04.2001 whichever is higher. Apply indexation on COA till 2019-20 to get ICOA.
- Deduct ICOA from net sale value. Net sale value is sale consideration less expenses on transfer.
Hi,
Yes, capital gain tax will be applicable. The amount of capital gain would depend upon the fair market value/ stamp duty value of the property as on 1.4.2001.
You can save taxes by investing the capital gain amount in another house property within 2-3years of sale. However, if you dont buy the property by November 2020, you need to deposit the money in a separate CGDS bank account.
Hope you are doing well !!
-Where a capital asset has been inherited/received in family settlement, 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.
As the 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 acquisition cost.
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,"
We can help you in getting the FMV of the property as on 1.4.2001
-Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date by you. Please share the details with us for exact capital gain calculation.
-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.
Such bonds shall be redeemable after 5 years. Only interest received on such bonds shall be taxable. There would be no taxes on redemption after 5 years.
-If you do not get a chance to invest in a profitable property immediately and still want to save your long-term gains from being taxed, you can invest your 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 you can utilise this account momentarily so that you save your 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.
It is advisable to take a phone consultation for detailed discussion.
We may assist you in entire procedure.
You need to provide the FMV of house on 01.04.2001 i.e. circle rate to calculate whether there is a capital gain or not.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Hi
Yes provision of capital gains will be applicable.
Calculation of long term capital gains is sales consideration less cost of transfer less indexed cost of acquisition less indexed cost of improvement.
If combined holding period exceeds 24 months, you get the right to deduct the cost of acquisition and the cost of improvement as enhanced by the cost inflation index multiplier. The cost inflation multiplier is calculated, based on the cost inflation index of the year of purchase and the year of sale.
The cost of acquisition will be the amount paid by any of the previous owners, towards the purchase of the house.
Moreover, in case the house was inherited before 1st April 2001, you may substitute the fair market value of the property as on 1st April 2001 for the ‘cost of acquisition’ and apply the cost inflation index multiplier on that value.
Long term capital gains will be taxed @ 20.8%.
Exemption from long term capital gains
For a long-term asset, you have two options to save taxes. You can either invest the capital gains on the purchase of one house within two years or construct one house within three years. 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.
Hello,
Firstly, you need to calculate the Captial Gain amount on the sale of such property.
Since the property was acquired by your father before 1st April 2001, the fair market value of the property as on 1st April 2001 would be considered as the cost of acquisition of the property, which would then be indexed till the year of sale for the indexed cost of acquisition. The net figure of the sale consideration and the indexed cost of acquisition would be your Long Term Capital gain taxable at 20% plus cess.
For capital gain exemption, you need to invest the long term capital gain amount in another house property and the full capital gain would be exempt from tax.
I hope this answer satisfies your requirements. For further understanding and proper capital gain calculation, you can contact us directly or take a phone consultation.
Regards,
CA Hunny Badlani
Yes there will be capital gain. Capital gain will be sale value less indexed cost of the property as on 1.4.2001. This amount can be invested in another property or in REC bonds which have lockin of 5 years to save capital gain tax.
