Hello Sir/Madam, We are selling our property at low price due to my father's debts and we may end up saving very less for their future. We do not want to lose any further by paying capital gain tax. We bought this flat in 2006 for 12 lakhs but on paper it was 6 lakhs now we are selling it for 22 lakhs while on paper it 33 lakhs. We are selling it for low as there is an emergency at home, the building is quite old, and people are not buying due to vastu reasons. Please can anyone guide us what are steps we need to follow to avoid paying capital tax? What are documents we need to be prepared with? Please help us, it is a humble request. I did Google about this but I need guidance in steps to be followed throughout the sale procedure, registration and receiving a bank cheque from the buyer..
Hello,
You will be required to pay capital gain tax on the amount of capital gains. In case you want to save on Capital Gains you will have to invest the amount of Capital Gains in Capital Gain Bonds by investing them in NHAI or REC bonds.
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
Hi,
You have to show the capital gain 33 lacs minus indexed value of 6 lacs. You can't show purchase cost as 12 lacs.
However, if the actual sale value is 22 lacs, then you can challenge the stamp duty value and mention in return that you have challenged SDV. but it will create litigation.
In order to a taxes, you can put in the capital gain amount in NHAI/ REC bonds or invest the same in other residental property
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
Capital gains tax is payable on the difference between Rs. 33 lakhs and indexed cost of Rs. 6 lakhs. You can avoid tax by investing in NHAI bonds / REC bonds or by buying another house.
I presume that the value is Rs. 33 lakhs based on the records of the registrar. You can declare a lower amount as sale consideration i.e. Rs. 22 lakhs, but it will lead to litigation.
To the extent possible receive the entire sale consideration by cheque or transferred to your bank account. Stamp duty and registration charges are payable at the time of registration of the sale deed, but they are usually borne by the buyer.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hi Sir/Madam, Thankyou all for responding to my question. Please can anyone help me calculate the tax we need to pay if we are selling the house for 33 lakhs on paper. While on papers we bought it for 6 lakhs. Thank you all for the support and your answers in advance. Kind regards, Praveen.
I suggest that you may invest in capital gains bonds / mutual funds and claim exemption for the entire capital gains. The investment is blocked for 3 years and thereafter you can withdraw the money. The interest is slightly lower than bank deposits but still decent enough.
The indexed cost of acquisition of flat acquired in 2006 (assuming that it was registered on or after 1st April 2016) is Rs 13.38 Lakhs (Rs 6Lakhs*272/122, i.e., cost *the index in FY 2017-18/the index in FY 2016-17). So your Long Term capital gains will be Rs. about Rs 20 lakhs, if you are selling the flat for Rs 33 Lakhs. The tax liability will be around Rs 4 Lakhs.
You can save this amount of Rs 4 Lakhs by investing Rs 20 Lakhs in capital gains bonds/mutual funds as suggested in the first para.
Thank you sir, one last question..can I claim brokerage fee of 1 lakh and improvement charges of 50 thousand for tax exemption. And by when should we pay tax to the goverment if we are selling the house before 31st of this month..
The brokerage fee payable on sale of the flat can be deducted from your sale proceeds. The improvement charges of Rs 50,000/- can be added to your cost of acquisition and indexed depending depending upon the year of improvement. Thus if the improvement was done, say, in the FY 2010-11, the index applicable for the FY should be taken for the purpose of arriving at indexed cost of acquisition.
If you invest in the capital gains bonds, there is no tax liability. If you want to pay tax, then you can pay advance tax in next 3 installments in September, December and March.
Hello,
Yes you can claim if you have documents to support your claim. The tax has to be paid before 15th September to avoid paying interest.
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
Hi,
You can claim Brokerage as a deduction (Assuming you have source to prove the same).
Indexed Cost of improvement can also be claimed as a deduction while calculating Capital Gains
Hi
1. Yes, you can claim brokerage fee of 1 lac and improvements charges of 50000, if there is actually an improvement.
2. You should pay advance tax by 15 September in order to avoid interest.
Further, return would be filed by 31 July 2018.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com