Sale of house

Sale of house

My mother bought a plot in 1989 through a society and built a house in 1992. A further portion was added to the house in 2005. We are in the process of registering the house in mine and my siblings name. (Two of us). We are now planning on selling the house. My question is
1. Should we bifurcate the khata? Does that help in saving on capital gains? As in will I and my sibling, both be allowed to put away 50L each in tax saving bond?
2. If we decide not to invest in property, after three years will we still have to pay Capital gains on the amount.
3. Can we keep a portion of the sale amount in a sb account or regular non bond account?

Asked 6 years ago in Capital Gains Tax

Hello,

1. It is preferable to transfer it before selling the property.

2. Yes, you will have to pay Long Term capital tax on the unutilised balance left in Capital Gain Tax saving scheme account. In case it is invested in bonds then the bond component will not be taxed.

3. Yes, you only have to deposit the capital gains and not the entire sale proceeds. You can keep the balance for yourself.

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

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Talk to Rohit R Sharma

Suppose we get 2crores, Up to what amount should be /can be put in tax saving bond by "each" of us(two of us)?
What will be the capital tax for each of us?

Asked 6 years ago

Suppose we get 2crores, Up to what amount should be /can be put in tax saving bond by "each" of us(two of us)?
What will be the capital tax for each of us?

Asked 6 years ago

Please let is know who funded the property. The owner of the property for the purpose of capital gain would be the person who has funded the property.

Both the siblings (if they are not minor) can take the property as a gift from your mother and then sale the property. In that case, benefit of 50 lacs can be taken by both of them.

Please feel free to call/ revert in case you need more clarity.

Abhishek Dugar

CA, Mumbai

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you can invest in tax saving bonds up to Rs. 50 Lakhs each, and for capital gain and tax calculation , you have to share purchase cost, construction cost , sales value, exp. on sales such as commission or any other , above getting above information we are able to assist you in a right way.

Lalit Bansal

CA, Delhi

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Talk to Lalit Bansal

Hi,

1. Yes, the amount of 50 lakhs to be invested in Capital Gains Bonds, is per person. Your siblings and you can claim in individually.

2. Yes, tax will be payable after 3 years, if you do not buy a property.

3. You have to keep the funds in a Capital Gains Accounts Scheme, which works like a savings account, Interest earned on it is taxable.

4. Calculation of Capital Gains:

Capital Gains is the difference between the Sale Consideration and the Indexed Cost of Acquisition.

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.

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.

Investment in Capital Gains Bonds:

You can save capital gains tax, if you invest the amount of capital gains in Capital Gains Bonds. You have to invest the capital gains amount and not the sale consideration figure. You can invest upto Rs 50 lakhs, and your sibling can invest Rs. 50 lakhs in his name. Suppose the capital gain arising from your calculation above is Rs. 1 crore, then you can save the entire capital gain, by both of you investing Rs. 50 lakhs each.

Trust the above clarifies.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B