Tax calculated- on capital gains from property
VISHNU
(Querist) 01 February 2012
This query is : Resolved
sir
1. My friend Tara singh father has purchased a immovable property in 1973 for Rs 2000/-. Afterwards the same property was sold to Rs 6 lac by Sh Tara Singh in a proper way.
Now the Query is as under:
(A) Whether the capital gains obtained by Tara singh on this property is taxable.
(B) If so at what rate and how it is calculated for same.
(C) In what way exemption from tax can be achieved
Pls educate on this & oblige.
A V Vishal
(Expert) 01 February 2012
When an asset held from more than 3 years is sold or transferred, the gain is referred to as long term capital gains. Long term capital gains are taxed at a fixed 20% for individuals.
Long term capital gains are taxed at 20%. Since inflation reduces the asset value over time, the entire difference between purchase price and selling price is not considered for LTCG. Indexation allows you to inflate the purchase price of the asset. This is done based on the inflation index provided by the Government for each year. The inflation index helps you to adjust the purchase price of the asset against the inflation over the years. With this, the asset price is brought on par with prevailing market price.
You can be exempted from long term capital gains if the profits of the sale of a residential house are reinvested in another residential house. Also, if the gains are invested in notified bonds, individuals can claim exemption from long term capital gains. The reinvestment must be done within prescribed time and there are certain conditions to it. When calculating LTCG, certain expenditure related to improvement of the capital asset as well as that relating to its sale and transfer is deducted.
Raj Kumar Makkad
(Expert) 01 February 2012
a. Yes.
b. You have not mentioned the year of sale of the mentioned property so it is impossible for any person to anticipate your tax liability in the given case.
c. If you purchase the residential house property within 3 years of sale of the aforesaid property only then you can save LTCG.
Saurabh Bajaj
(Expert) 02 February 2012
Agree with Makkad Sir on A and B.
On C, just to add, the tax on LTCG can also be saved by investing in Capital Gains bond u/s 54EC.
C. P. CHUGH
(Expert) 05 February 2012
In Your Querry Crucial Fact is missing i.e. when and how the property changed ownership from your friends father and to your friends.
Whether it was purchased by your friends from his father, if so when and at what cost.
Whether it was gifted by his father, if so when ?
Whether he get it on the death of his father under any will or succession, if so in which year.
The answers to above would make your querry specifically answereable, however, generally the answers provided by the xperts are correct and need no revision.
Thanks
