Will there be any wealth tax or income tax if flat is sold
Querist :
Anonymous
(Querist) 09 November 2010
This query is : Resolved
A flat was purchased with 100% white money in 1997 for a total of Rs 5,50,000(Cost of flat Rs 5,00,000 + Rs 50,000 as registration fees.)If the flat is sold in 2010 or 2011 at price of Rs 20,00,000 what will be the wealth tax, income tax or any other tax due to be paid on Rs 20,00,000? The seller of flat has no other taxable income and is a senior citizen.
R.Ramachandran
(Expert) 09 November 2010
The cost of acquisition in 1997 (Rs. 5.5 lakhs + any costs incurred in carrying out improvements) will be increased by adopting the inflation index to arrive at the cost of acquisition in the year 2010.
From the sale proceeds of Rs. 20 lakhs the cost of acquisition (i.e. indexed figure for the year 2010) will be deducted. The difference is called Long Term Capital Gain. Long Term Capital Gain will attract 20% income tax.
However, if the capital gain is invested in purchasing another property, then the capital gain tax will not be levied rather the capital gain will get exemption from tax.
Querist :
Anonymous
(Querist) 10 November 2010
Excellent! Thank you Mr. R. Ramachandran for your concise and professional answer. Is there any time limit within which the sale proceeds have to be invested for purchase of another property and has the property to be a residential property or it can be plot of residential land or agricultural land.
R.Ramachandran
(Expert) 10 November 2010
Dear Sir,
To avoid income-tax, within two years from the date of sale, the capital gains (not the entire sale proceeds) is to be invested in acquiring a new residential property. [The capital gains arising out of sale of residential property cannot be used for any other purpose like investing in land etc. for avoiding income-tax].
If the capital gains is not utilised in acquiring a new residential property before filing of the income tax return, then the amount of capital gain has to be deposited, before filing of the income tax return, in an approved Capital Gains Accounts Scheme, available with the Banks. If the amount so deposited is not used within the stipulated time for acquiring a new residential premises, then the same would be treated as income in the year of sale and would be subjected to levy of income tax.
Querist :
Anonymous
(Querist) 12 November 2010
Excellent! Thank you experts, especially Mr. R. Ramachandran for having such a good understanding of the subject and clarifying even without asking that "capital gains (not the entire sale proceeds)". Before that I was under impression, that the entire sale proceeds to be a capital gains. His reply for me is worth more than thousands of rupees! My query stands completely resolved!
PALNITKAR V.V.
(Expert) 13 November 2010
I am also benefitted by Mr. Ramchandran's reply. Thanks
Querist :
Anonymous
(Querist) 14 November 2010
It is true.
aman kumar
(Expert) 15 November 2010
The capital gain is invested in purchasing another property, then the capital gain tax will not be levied rather the capital gain will get exemption from TAX
Querist :
Anonymous
(Querist) 15 November 2010
Thank you experts, my query is resolved.
