• Tax query for purchase and sale of flat

Hi,

I have sold my Old flat (No Loan) and I have already purchased new flat (with Loan).

Let me know how I can send the Details of Sold Flats.

My Queries are,

1. How much Tax I will have to pay (Purchase Agreement Date -  Oct 2011, Sale Agreement Date - July 2017 )?
2. How I can save the maximum Tax for this transaction. What are all options I have for saving Tax
3. If I have to pay Tax, when I can pay, at a time of IT return or now?
4. Is there any benefit in paying Tax now or at time of IT Return?
5. I have purchased new flat and currently home loan is in progress. Agreement Date for this flat is 5 Nov 2015 and i got possession in Dec 2016. I want to repay my Loan.Can I get Tax benefit on loan repayment?

Thanks,
Viraj Save
Asked 6 years ago in Capital Gains Tax

Hi Viraj

Long term Capital Gains are charged @ 20%. Since you have purchased a new flat, we will have to know first whether you are eligible for the exemption for the same. For that, we would need to know the date of allotment of the flat.

If there arises any capital gains tax, it shall be paid similar to the provisions self assessment tax. It shall be paid at the time of IT return filing. Whether any advance tax is applicable will depend on the amount of capital gain tax liability. Paying Advance tax will save interest on tax.

Let us know the date of allotment of the new property.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

Hi Viraj,

1. Primarily, if you have bought the new flat for an amount higher than your capital gain arising out of the old flat then your entire capital gain will be exempt.

Calculation of Capital Gain:

The indexed cost of acquisition of the old flat will be reduced from the sale consideration received on sale of the old flat.

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 2011 (i.e. 184).

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 old flat.

Only if this amount of capital gain is lower than the value of the new flat, will you have to pay capital gain tax. Tax will be payable only the differential amount.

2. To save the complete amount of tax, you can invest in Capital Gain Bonds like REC or NHAI Bonds. However, the interest earned from these bonds will be taxable.

3 & 4. You can pay advance tax now too, or pay self assessment tax after 31 March 2018. Preferably, pay tax now to save interest liability.

5. The principal repayment can be claimed as a deduction under section 80C upto Rs. 1,50,000 per year.

Trust this clarifies.

Regards,

Keerthiga Padmanabha

M.Com, CA, LL.B

Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
27 Consultations

5.0 on 5.0

hi,

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.

Vishakha Agarwal
CA, Bangalore
448 Answers
85 Consultations

5.0 on 5.0

Hi,

Tax on Long Term Capital Gain is 20%

It is calculated by using-

Selling Price less indexed cost of acquisition.

Indexed Cost of Acquisition=(Cost of Acquisition * Cost of the Inflation Index (CII) for the year in which the asset was sold or transferred.)/ The cost of Inflation Index (CII) for the year in which the asset was first held by the assessee OR FY 2001-02, whichever is later.

if you have invested the capital gain amount in the New flat and registry got done within a prescribed period (as mentioned in my previous reply), there is no need to pay any capital gain tax but you are required to declare this in income tax return.

Vishakha Agarwal
CA, Bangalore
448 Answers
85 Consultations

5.0 on 5.0

Hello Viraj,

1. In order to calculate your capital gain we shall need your cost of purchase and sale proceeds.

2. You can invest the capital gain in Capital gain Tax Saving Bonds upto a maximum of Rs.50 Lacs within 6 months from the date of sale.

3. You will have to pay the tax now or else you will be charged Interest on the same.

4. Yes, you will save up on Interest.

5. No benefit can be claimed.

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

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

If you sold a flat and purchased a new flat and invested the capital gains arrived from sale then you need not pay any tax.

If you can send us the details by mail.

Shyam Sunder Modani
CA, Hyderabad
1408 Answers
164 Consultations

5.0 on 5.0

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