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Kumar R. (Executive)     13 November 2009

Capital Gain Tax - To be paid Or Not?

Please reply the following queries on urgent basis regarding the Long term capital Gain on property.

My father contructed a house in the year 1991 on the land purchsed by him in the same year. Now he want to sale this house and buy another house. Please clarify whether he has to pay the LTCG. As the cost of new house (which is proposed to be purchased) is less then the cost of the old house (Which is to be sold).

Consider the following points and reply accordingly.

1. He does not have taxable income beyond the exempt limit therefore he is not submitting the Itax Return.

2. He is retired person with no considerable income.

3. He does not have PAN number.

4. His age is about 72 years.

5. He is the legal owner of the house to be sold.

6. He want to buy the new house in his own name.

Thanks in advance.







 3 Replies

pkpworld.. (consultant)     13 November 2009

If your father purchase nw house within 2 years after the date of selling old house, an exemption u/s 54 of Income Tac Act will be available to him.  However the excess amount over the pruchase value will be treated as taxable capital gain.  Your father have to pay tax at the prescribed rate and have to file return of income if the total income (Capital gain plus other income) during the FY exceeds Rs.225000/- otherwise your father need not to be worry about tax.  For filing a return a PAN is required. 

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     15 November 2009

The opinion of pkpworld in the given circumstance is accurate.

Vineet (Director)     15 November 2009

 The opinion given by pkp is correct in the given facts.


Please note that you will be benefited by indexation benefit  of cost while computing the long term capital gain.

If investment in new house is more equal or more than the LTCG computed after availing the benefit of indexation, LTCG TAx @20% will be payable subject to other income of your father.

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