Tax on land selling

Hii

Tax liability on sale of Madam's Property depends on date of purchase and its cost and date of transfer of property in her name.

For tax saving

Stamp Duty paid at the time of registration and Principle part paid in home loan you can claim under section 80C

and interest paid on home loan also save your tax as negative income under the head house property.

Hi,

Yes, she can invest the sale proceeds in repaying of the loan amount. and you are eligible to claim interest on the loan amount up to Rs 2 lakhs (self occupied) and no limit for let out property. and of principal amount upto 1.5 Lakhs. she is not required to pay capital gain if she utilized the amount in below given option.

even if the house is in joint name , she is eligible for the capital gain exemption.

there are three ways in which you can get capital gain exemption

if you planning to purchase another property or have already purchased one year back from the sale of the property then

under section 54:

The exemption under this section is only available to persons that satisfy the following conditions:

An individual or Hindu Undivided Family (HUF) that legally maintains ownership of the house property;

The house property is used only for residential purposes;

The house property is a long term capital asset, and was not transferred or sold within the first three years after the initial date of purchase or construction.

To claim the exemption, one must invest the proceeds derived from the sale of the house property into another residential house either within two years from the date of the sale or one year prior to sale, or one must invest in the construction of a new house within three years of the sale.

The exemption amount will be:

Equal to the amount of the capital gains if the cost of the new house property is greater than the capital gains; or

Equal to the cost of the new house property if the cost is less than the capital gains.

Meanwhile you can park your capital gain (full amount or utilized amount) in CGAS (Capital Gain Account Scheme)

This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.

The deposited money can be used only to buy or construct a residential house within the prescribed time frame.

If you withdraw funds from this account, they have to be used within 60 days.

If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.

The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

You can invest the capital gain amount in bonds under section 54EC:

Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.

These bonds are issued by the Rural Electrification Corporation and the National Highways Authority of India.

The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable.

These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property.

You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).

You can invest a maximum of Rs 50 lakh during a financial year in these bonds as per Budget 2015-16.

Hello Sathish,

You can adjust the Capital Gains from sale of property against your house purchased. It can be anytime till one year from the date of your purchase which in your case would be 28th July 2017.

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

Dear Sathish,

If you sale the property before 28 July 2017, you can adjust your capital gain against the property purchase by you and your wife one year back. In that case, your wife will not have to pay capital gain tax.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

The LTCG may be used for the repayment of your housing loan in respect of house purchased on 29th July 2016, provided the date of your proposed sale cannot be beyond 1 year from 29th July 2016, i.e., 28th July 2017.

Hi,

I guess you are selling a Land which was gifted to your wife by her Mother. If you use the Amount for pre-payment of existing House Loan, then there will not be any Deduction from Capital Gains.

I suggest you to invest only the Capital gain amount in REC or NHAI Bonds and claim full tax deduction u/s 54EC. The investment should me made within 6 months from the date of sale. These bonds will have a 3year lock-in period.

In that case, you can use the balance amount for partial pre-payment of existing Housing Loan.

As per our view Yes she can use this money to pay housing loan. It is exempt as the purchase was made within one year before sale