Tax liabaility on sale
Manish Sinha
(Querist) 16 September 2013
This query is : Resolved
Hi and good evening,
I have sold a property for 35.5 lakhs and would be investing the money in purchasing another property within 1 month.
Original cost of property was 24.5 lakhs purchased in Sept 2010 under a CLP plan with home loan from HDFC.
I have closed the loan of 15.85 lakhs.
The agreement to sale is for 35.5 lakhs.
I hope there won't be any tax liablity.
What would be the formality at bank when I deposit the cheque.
Please advise.
R.K Nanda
(Expert) 16 September 2013
contact tax lawyer.
Anirudh
(Expert) 16 September 2013
Capital gains = (Sale Proceds) minus (indexed cost of acquisition + indexed cost of improvement (if any) + expenditure incurred in transfer of the property)
Indexed cost of acquisition = Rs.2450000 * 939/711 = 32,35,654/-
Therefore Capital gain = 3550000 minus 3235654 = 314346/-
In your case if you invest in the new house Rs. 314346/- you will go without any long term capital gain tax. However, since according to you, you will be investing the entire sale proceeds of Rs. 35.5 lakhs into the new house, there will not be any capital gain tax at all.
HOWEVER, THE ABOVE VIEW IS SUBJECT TO THE CONDITION THAT YOU HAD SOLD THE PROPERTY AFTER 3 YEARS FROM THE DATE OF PURCHASE OF THE PROPERTY. You have simply indicated that you purchased the property in Sept. 2010 without indicating the actual date of purchase. Similarly, you have said that you had sold the property, again without indicating the date of sale.
THEREFORE, IF YOU HAD NOT HELD THE PROPERTY FOR 3 YEARS FROM THE DATE OF PURCHASE, THEN IN THAT CASE YOU WILL BE LIABLE TO PAY "SHORT TERM CAPITAL GAINS TAX". This will be calculated at the normal slab rate of income tax applicable to you.
Manish Sinha
(Querist) 17 September 2013
My cash in hand is 20 lakhs after paying off the outstanding loan. (35.5 minus 15.5 loan)
Date of Allotment : 10-Sept-2010
Date of possession: Under construction
Date of Sale : 27-July-2013.
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Many Thanks !
Anirudh
(Expert) 17 September 2013
You are liable to pay normal income tax on the sale proceeds (minus) original cost of acqusition. You are not entitled to indexation benefit. You are also not entitled to the fixed rate of 20% as applicable to Long Term Capital Gain Tax. THIS IS BECAUSE, YOU DID NOT HOLD THE ASSET FOR 3 YEARS (10.9.2010 to 27.7.2013 = less than 36 months).
Ms.Nirmala P.Rao
(Expert) 17 September 2013
Dear Client,
Since the entire money you're going to reinvest in another property and if it is a residential house property and if it's your sole residential property, then there is no tax liability at all.If already you've one residential property occupied by self buy another residential property in the name of anyone of your family members if all are majors. If anyone of them is a minor, then it will be included in your total income and subject to income tax.
Ms.Nirmala P.Rao
Legal Expert
Ms.Nirmala P.Rao
(Expert) 17 September 2013
Dear Mr.Sinha,
As you held the capital asset for less than 3 years a pointed out by Mr.Anirudh, you are liable to pay short term capital gains tax since the capital asset is held by you for less than 3 years. Only if it is a long term term capital gain and if it is invested for purchasing a residential house for self and the value of new residential house within one or two years as the case maybe of transfer of the previous residential house you'd be entitle to claim tax exemption under Se3ction 54 of IT Act 1961.
Ms.Nirmala P.Rao
Legal Expert
