• Selling second property

Currently my mom is a single owner of a house in which we all reside. My mom is also a single owner of a land (plot in a residential urban area). Now she is planning to sell the land and wants to buy a flat jointly with me. Approximate market value of the land is Rs.75 lakh and value of the flat that we are planning to buy is Rs.80 lakh. To buy a new flat, my mom will be contributing Rs.30 lakh from the sale proceeds of the land (remaining money she will keep in FD i.e Rs.50 lakh) and I will be contributing Rs.50 lakh from the bank loan. Purchase value of the land was Rs.7 lakh, bought in the year 2007 and there wasn’t any improvement expenses incurred till date on the land.

From the above information please answer the following questions.

1) Do my mom needs to pay long term capital gain tax on sale of a land if she sells it in the current financial year? If yes, how much capital gain tax and on what amount? 

2) After sale of land, Can she keep money in her saving account till we finalise flat purchase deal?

3) Is there any better way to reduce tax liability, provided the above information remains fixed.

4) If she is able to sale the land in this year and buy flat in the next year, how income tax return will be filled? She was not filling the income tax return before as she is home maker.
Asked 2 years ago in Capital Gains Tax from Nashik, Maharashtra
the answer for part 1 1 Sale Proceeds 75,00,000 2 Cost 7,00,000 3 Index cost [750000*1125/591] 13,32,487 4 Long Term Capital Gain [1-3] 61,67,513 Tax on above @ 20% 12,33,503 If she purchase or construction a new Resi. House then 5 Amount Paid 30,00,000 6 Net Long Term Capital Gain [4-5] 31,67,513 Tax on above @ 20% 6,33,503 Part II - She need to keep money in "CAPITAL GAINS ACCOUNT SCHEME" in any nationalised Bank. Part III - the better way that the new flat will be purchase in the name of your mother and she will pay the full amount. the she will claim the deduction of Section 54. Part IV - As she earn the capital gain and claiming the deduction u/s 54 so she required to file the ITR it's don't matter that she is home maker and she does not have any regular income. and you inform that she will deposit the 50 lac in FD. So she will earn the interest on FD, Every year Bank will deduct TDS and your mother is required to file the ITR.
Mohit Agarwal
CA, Agra
37 Answers
1 Consultation

4.3 on 5.0

Hi, 1) Yes. She will have to pay Long term Capital Gain Tax, subject to Exemptions available. Based on the information provided, Capital Gain is coming to around Rs. 61 Lakhs. Long term Capital Gain Tax is 20.6% on the Capital gain amount 2) Yes. She can 3) Your Mother can invest upto Rs. 50 Lakhs in Capital Gain Bonds (Within 6 months from the date of sale of the Land) rather than Fixed Deposits. This will be allowed as deduction against the Capital Gain amount u/s 54EC. You are planning to invest Rs. 30 Lakhs in new house. Both these investments put together can exempt the entire Capital Gain amount (Calculation Subject to the actual amounts invested) 4) If she is not able to purchase the House before the Due Date for filing returns (i.e 31-Jul-2017), then the un-utilized amount has to be deposited in Capital Gains Account Scheme and the House can be purchased any time before 2 Years from the sale of Land Feel free to contact me for any clarifications Regards CA Pradeep Bhat
Pradeep Bhat
CA, Bengaluru
477 Answers
30 Consultations

5.0 on 5.0

Hello Sir, 1. Yes, your mother may be liable to pay Long Term Capital Gain Tax. 2. After sale of land, she has to deposit the amount in a Long Term Capital Gain Tax Saving Scheme. 3. She may increase her share of investment in the flat or may invest the balance of Capital Gains in Tax saving bonds. 4. After you deposit the funds in a CGAS, then you can file the return by showing that the amount is kept in CGAS and shall be invested for purpose of buying a property. Trust this clarifies your query. Feel free to call / get back in case of further clarifications. Thanking You. Regards, Rohit R Sharma BCOM, ACA, LLB-GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

Hi , your case falls under section 54F, if your mother sells a land and contribute part of the sale proceeds in purchase of the house, she will get the capital gain exemption proportionately. to get the full benefit, she can deposit remaining capital gain amount in 54EC - REC or NHAI bonds. below is the summary of section 54F- The Exemption under Section 54F The exemption can be for the full amount of capital gains. The capital gain amount can be invested in the capital gains account till it is utilized for purchase or construction of a house. The deposit in capital gain account should be before filing income tax return. Conditions of Section 54F The exemption is allowed only if the new property is a residential house. The exemption is allowed, If you did not have more than 1 residential property before the new house. The purchase of new residential house should be within one year before or 2 years after. The construction of residential house should be completed within 3 years. The residential house should be in India. The assessee should sell or transfer the new house within three years of its purchase or construction. If it happens, the capital gains exemption would be withdrawn similar to the section 54. Calculation of Exemption Under Section 54F The total capital gain would be exempted if 100% sale proceeds is invested in the residential property. If full capital gains is not invested, exemption shall be allowed proportionately. The exempted amount would be calculated according to the following formula. i believe all your questions are answered. Capital Gain X Amount Invested Net Sale Consideration The exemption can’t be more than the capital gain.
Vishakha Agarwal
CA, Bangalore
448 Answers
64 Consultations

5.0 on 5.0

hope your query is answered . For more info mail at modani005@gmail.com
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
107 Consultations

5.0 on 5.0

The buyer of the Property has to deduct TDS at 1% if the Total Sale Consideration exceeds Rs. 50 Lakhs. So, when your mother is selling the Property, the buyer has to make TDS. When you buy the new Property, both you and your Mother have to deduct TDS on respective share of Property.
Pradeep Bhat
CA, Bengaluru
477 Answers
30 Consultations

5.0 on 5.0

This is your Income which was deducted by the bank as per income tax rules. so you required to file the ITR and if there is any refund then Income tax department will pay the amount.
Mohit Agarwal
CA, Agra
37 Answers
1 Consultation

4.3 on 5.0

no
Vishrut Rajesh Shah
CA, Ahmedabad
631 Answers
13 Consultations

5.0 on 5.0

buyer is liable to deduct TDS @ 1% if the property sold is valued more than 50 Lakh rs. she can claim that amount while filing the IT return in the financial year in which the amount is deducted, otherwise is also she should file the return in the year in which the property is sold.
Vishakha Agarwal
CA, Bangalore
448 Answers
64 Consultations

5.0 on 5.0

Dear Sir, you are planning to sell the land purchased by your mother in A.Y 2008-09 and the investing Rs. 30 Lakh in new flat. 1) According to the information provided by you your mother will be liable to pay tax on long term capital gain of Rs. 737628.87 on capital gain of Rs. 3688144. 2) yes, after the sale she can keep the money in her saving account but it is required to file AIR(Annual Information Report for the such receipt). she can keep that amount till the filing of the ITR of the assessment year in which the sale is made. Before filing the ITR wither she has to invest the whole consideration in residential plot or deposit the amount in capital gain depository scheme if she wants to claim exemption u/s 54F. 3) yes, you can save your entire capital gain tax if your mother invest the entire consideration of sale in residential property. 4) yes it is possible that she sells the land this year and invest in flat next year but before the filing of ITR, if not invested till the filing of ITR then she is required to deposit the money in capital gain depository scheme but the investment in new property is required to be made within 2 years from the sale of property.
Yogesh Kumar
CA, Delhi
7 Answers

Not rated

Hello Sir, You need to file the IT Return and adjust the TDS and claim a refund if elligible. Trust this clarifies your query. Feel free to call / get back in case of further clarifications. Thanking You. Regards, Rohit R Sharma BCOM, ACA, LLB-GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

sir you can mail at modani005@gmail.com
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
107 Consultations

5.0 on 5.0

I am assuming your query has been resolved. If not please let us know at
Abhishek Dugar
CA, Mumbai
3576 Answers
162 Consultations

5.0 on 5.0

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