Capital gain
s.k.majumdar
(Querist) 07 April 2014
This query is : Resolved
Dear sir
i)My parents expired in 1999 leaving one no. two storied House(1200sq ft) and agricultural land(20 bigha) in West Bengal without making any will.
ii)The above properties were purchased by my father in and around 1947 from another person.
iii)We are two brothers and three sisters being the legal heirs.
iv)Recently in the FY year 2013-2014 the said properties were sold for a total sum of Rs 30 Lakhs and the sale proceeds were distributed equally between the legal heirs i.e two brothers and three sisters.All of us submitted Pan card no at the time of sale.
v)Whether the above transaction will attract capital gain tax in the hand of the recipients? If so,how to calculate the tax in view of the acquisition of the properties made by my father in 1947 and the same sold in 2013-2014.
Kindly help and guide us.
s k majumdar
Audit Manager
Devajyoti Barman
(Expert) 07 April 2014
You yourself appear to be a Tax Consultant.
Better take help of your colleagues.
Rajendra K Goyal
(Expert) 10 April 2014
Consult your tax consultant and get the liability worked out if any.
Anirudh
(Expert) 10 April 2014
(1) Yes, the above transaction will definitely attract Long Term Capital Gains Tax and the capital gains tax at the rate of 20% on the capital gain is payable.
(2) Capital Gain = Sale Proceeds (minus) Indexed Cost of Acquisition of the property (minus) indexed cost of improvement if any, made on the property, (minus) expenditure, if any, incurred for transfer of the property.
(3) The Capital Gains tax can be avoided provided the amount of capital gain earned in respect of agricultural land
(a) is used in acquiring new asset i.e. land within two years after date of sale, and used for agricultural purposes; or
(b) is deposited in a specified account, before due date for furnishing I.T. Return. However, if the amount so deposited is not utilised within two years as stated at (a) above, then the entire amount of capital gain shall be subjected to tax in the Assessment Year, relevant to the previous year in which the two year period ends. (Sec. 54)
(4) Similarly, the Capital Gains tax can be avoided provided the amount of capital gain earned in respect of house property sold
(a) is used in purchasing a new house one year prior to and within two year after the sale; or constructing a new house within a period of 3 years after the sale.
(b) is deposited in a specified account, before due date for furnishing I.T. Return. However, if the amount so deposited is not utilised within two years for purchase or three years in the case of construction, then the entire amount of capital gain shall be subjected to tax in the Assessment Year, relevant to the previous year in which the three year period ends. (Sec. 54B)
If it is not proposed to purchase or get constructed a new house, then Capital Gains Tax can be avoided by depositing the amount of capital gains in Long Term Specified Assets (i.e. National Highway Authority of India / Rural Electrification Corp. Ltd., bonds with a lock in period of 3 years. (Sec. 54EC)
