"My husband expired on 16-07-2015. I inherited a property from my husband post his death, in Tamil Nadu. I am the only legal heir.I inherited the property on 13-11-2015. My late husband had purchased the land in 1992 and constructed the house in 1996-97. I am not aware of the cost of acquisition.(I got married to my late husband in the year 2006) I have identified a buyer and want to sell this inherited property for 55 lakhs in the month of December 2017. Please let me know if the sale proceeds will be considered as short term or a long term gain. From these websites, 1) https://www.relakhs.com/how-to-save-capital-gains-tax-on-sale-of-land-house-property/ 2) http://www.charteredclub.com/capital-gain-tax/ I infer that from Financial Year 2017-18 onwards, Long term capital gains arises when the asset is held more than 24 months. What is your opinion on this? How much Capital Gain Tax needs to be paid? I want to initially deposit the entire sale proceeds amount in Capital Gains Account scheme. Later, I would like to repatriate the sale proceeds to USA for acquisition of a property in USA. Currently, I am remarried and staying with my spouse in USA. Please tell me appropriate ways to minimize the taxation.
Hi,
The gain will be considered as long term capital gain because the holding period of your husband will also be counted.
For calculation of capital gain , you will have to found out the stamp duty value of the property as on 1.4.2001 and indexed it to the year of sale. This indexed cost will be deducted from the sale value and the balance will be capital gain.
Hi
The transaction shall be taxed as Long Term Capital Gains because in case of gift, the holding period of the donor i.e your late husband shall apply.
For calculation of cost of acquisition, value as on 01-04-2001 needs to be determined and the same shall be indexed to reach out to the Indexed cost of acquisition.
The capital gain tax exemption will be available only if you invest the same in India and not in the property in USA.
To reduce taxes, the amount of capital gains need to be invested in another house property in India or investment can be made in 54EC bonds within 6 years of sale. The bonds shall have to be held for 3 years after purchase.
Thanks Lakshita ! I do not know the cost of acquisition by my late husband i.e cost of the land as well cost of construction. None of his family members are surviving now to whom i can get the details. Under this context please advise, how do we calculate the Indexed cost of acquisition. My 2nd question : If i deposit the sale proceeds in Capital Gains Account Scheme (Savings Deposit), and if i withdraw the amount for repatriation to USA. Will the bank deduct the LTCG ? and i receive the balance proceeds or Will the tax advisor later file the capital gains tax and i remit directly the LTCG to the Income tax authorities ? Can you please advise and help me ?
You can contact a local registered valuer in the area of property who shall hello you in arriving at the costs.
If you will be paying capital gain taxes while filing the returns, there is no requirement to deposit the amount of sale proceeds in Capital Gain Deposit Scheme Accounts.
Hi,
The gain what you will earn from the sale of the property will be Long Term Capital Gain.
Since you inherited the property, the law assumes that you acquired the land in 1992 and house in 1996.
Calculation of Long Term Capital Gain:
Sale Consideration minus the Indexed Cost of Acquisition will give you the amount of Capital Gains.
Indexed Cost of Acquisition is the Actual Cost of Acquisition of the property multiplied by the Cost of Inflation Index for the year of sale and divided by the Cost of Inflation Index for the year of purchase.
In your case, since the property is older than 2001, you will need the cost of the property (land and house) as on 1 April 2001. You can either obtain a registered valuer's report or obtain it from the Registrar's Office in Tamil Nadu.
The Cost of Inflation Index for FY 2017-2018 is 272.
The Cost of Inflation Index for FY 2001-02 is 100.
The Capital Gains Tax payable is 20% of the capital gain calculated above.
Repatriation:
If you want to save the 20% capital gains tax, then you can either invest the capital gain amount in Capital Gain Savings Bonds or in another house in India. The house in India has to be purchased within 2 years (if it is a constructed property) and 3 years (if it is an under constructed property). If you choose to invest in Capital Gain Savings Bonds, then you will have to invest for a period of 3 years.
Please note, Capital Gain Savings Bonds are different from Capital Gains Account Scheme. You have to park the funds in a Capital Gains Account Scheme, if you plan to buy a house in India to save tax.
Buying a house in USA, cannot exempt the capital gains in India.
You can repatriate the funds to USA immediately, once you pay the capital gains tax.
If you park your funds in a Capital Gains Account Scheme, and then you want to transfer funds out of it to the USA,
the bank will let you do so only after you submit a proof of payment of taxes. You or your tax adviosr can pay the taxes online at any point of time.
Trust the above clarifies.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hello,
You will have to approach the registrar and get the valuation as on 01st April 2001. Considering that valuation you can calculate the Capital gains which have to be invested in a property in India or you can invest in capital gain tax saving bonds for a span of 3 years and then repatriate the same to USA.
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
Thanks Lakshita and Keerthiga ! Lakshita says, If I will be paying capital gain taxes while filing the returns, there is no requirement to deposit the amount of sale proceeds in Capital Gain Deposit Scheme Accounts. Can I directly deposit the Demand Draft received from the Buyer in my Savings Account? Is there a TDS that I have to pay at the time of transferring the property in the Buyer's name?
For calculation of capital gain , you will have to found out the stamp duty value of the property as on 1.4.2001 and indexed it to the year of sale. This indexed cost will be deducted from the sale value and the balance will be capital gain. You can find it out from registrar office.
You dont need the actual cost of land and cost of construction.
Your question number 2 will depend upon your capital gain liability.
Yes, provided you file the returns before due date of return filing.
The buyer will deduct TDS @1% and make rest of the payments to you. You should collect Form 16B from the buyer and ensure that the TDS is reflected in your 26AS statement.
Query specifically asked to Lakshita.