We are selling our residential property in Bangalore in september 2017. We would like to know how much is the long term capital gain on this sale. Details are as below: We have purchased when it was under-construction and signed the agreement to sell and agreement to built in Feb 2013 for 50 Lakhs Registration was done on 8th July 2015 at cost 1.90 Lakhs. We will be signing the sale deed on 15 September 2017 for 66 lakhs. We had taken a loan of 40 lakhs and paid 2 lakhs principle so far. 1) What are the tax implications 2) How much is the long term capital gain tax 3) What are the different ways of claiming exemption on the long term capital gain tax.
Hi,
1 and 2. I would do the calculations of capital gain tax and will let u know...It will be approx 8 to 10 lacs.
3. You can save the capital gain taxes by investing the capital gain amount in another residential property within 2/3 years from the date of sale or investing in eligible bonds within 6 months from the date of sale.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
1. Tax on LTCG @ 20% shall be payable.
2. The LTCG would be around 10.4 Lakhs.
3. You can invest the said amount of capital gain in another house property or in notified bonds redeemable after 3 years to claim the exemptions.
# My calculation of LTCG is based on the assumption that Letter of allotment was received in 2015.
Thank you for the answer. What is the process of applying to the bonds? 1) How much is the interest and is it taxable? 2) Whom can i approach to invest in bonds? 3) Do they liquidity after the lock-in period is over. 4) Can the again be invested in agricultural land ?
You can contact any bank for such bonds.
Interest rate varies from 5.5-6.5% p.a.
The interest is fully taxable under the head Other Sources.
The bonds shall be redeemed after 3 years after which you are free to deal with the money as you want.
All right. Thank you. In case we are reinvesting the amount now can we get exemption if we invest in agricultural land ? or it necessary to opt for residential property only?
When you are selling a residential property, you have only 2 investment options:
1. section 54 another residential property
2. section 5EC bonds
The investment in bonds have to be made within 6 months from the sale of the residential property.
Hi,
1. Interest is different for each bonds. You need to check with your broker. Yes, interest is taxable.
2. Any security broker
3. Yes, you can reslae the bonds after 3 years.
4. After reselling the bonds, you can use the money whatever way you want.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
You will be liable to pay tax at the rate of 20% on the capital gain earned on the sale of property.
Calculation of Capital Gain:
The indexed cost of acquisition of the property will be reduced from the sale consideration received on sale of the property.
The indexed cost of acquisition will be the actual cost of acquisition, multiplied by the inflation index for 2017 (i.e. 272) and divided by the inflation index for 2013 (i.e. 200).
The actual cost of acquisition will be the amount paid by you for the property along with any amount of stamp duty or brokerage fees. If you have incurred any amount for its improvement (like structural changes), then you can add that too to your cost of acquisition.
If you reduced this amount from the sale consideration, then you will get the amount of capital gains that you have earned from the sale of the property.
Saving Tax:
You can either invest the capital gains amount in another residential property or in Capital Gains Bonds. You cannot invest in agricultural land. Please note, that the capital gains has to be invested and not the sale consideration.
You can contact any bank / broker for investing in these bonds. The rate of interest will vary based on the bond. Interest income earned from such bonds will be taxable.
Further, have you claimed tax benefit of the repayment of principal amount of Rs. 2 lakhs? If you have claimed benefit under section 80C, then that amount will be taxable too since you are selling the property within 5 years from the date of possession of the property.
Trust this clarifies.
Regards,
Keerthiga Padmananabhan
M.Com., CA, LL.B
Hello,
Assuming that your earlier questions are resolved and answered. I am just answering your recent question: You cannot buy an agricultural land in order to claim deduction but have to invest in a new residential house property only or invest the same under bonds (NHAI/ REC) upto a maximum of Rs. 50 Lacs only.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
