Tax pro­vi­sions for sale of as­sets

The In­come Tax Act grants de­duc­tion in re­spect of long term cap­i­tal gain aris­ing on sale of any as­set other than res­i­den­tial house property

HT Estates - - HTESTATES - Ash­lesh Varma, Ratna K and Shruthi K

Are you plan­ning to sell your as­sets and are con­cerned about the in­come taxes you may be li­able to pay? Here is what you may want to know and understand for shield­ing your gains from the tax scis­sors.

The In­come Tax Act pro­vides for tax de­duc­tion for the rein­vest­ments made con­se­quent to sale of Long Term Cap­i­tal As­sets (LTCA). An as­set is said to be a LTCA if the pe­riod of hold­ing such an as­set be­fore trans­fer ex­ceeds 36 months from the date of ac­qui­si­tion. The pe­riod of hold­ing for cer­tain cat­e­gory of listed se­cu­ri­ties, eq­uity ori­ented mu­tual fund units and bonds is only 12 months in­stead of 36 months.

Sec­tion 54F of the In­come Tax Act grants de­duc­tion in re­spect of Long Term Cap­i­tal Gain (LTCG) aris­ing on sale of any LTCA, other than res­i­den­tial house property, upon rein­vest­ment of sale pro­ceeds in a res­i­den­tial house property and ful­fil­ment of cer­tain con­di­tions.

Th­ese pro­vi­sions were first in­tro­duced in the year 1982 with a view to en­cour­age in­vest­ments into res­i­den­tial house prop­er­ties. Iron­i­cally, in its orig­i­nal avatar in 1982, de­duc­tion was not avail­able if a per­son al­ready owned any res­i­den­tial property as on the date of trans­fer of the LTCA. It is only in the year 2000, the crit­i­cal amend­ment was made, so as to ac­com­mo­date the de­duc­tion even when a res­i­den­tial house property is al­ready owned at the time of trans­fer; but this is lim­ited to own­ing not more than one res­i­den­tial house property other than the new res­i­den­tial house property that one is in­tend­ing to in­vest.

The pro­vi­sions of this sec­tion are avail­able only to ben­e­fit an in­di­vid­ual or a HUF.

Ways of re-in­vest­ment

Pur­chase of res­i­den­tial house property: Pur­chase needs to be made within one year prior to

Con­struc­tion of res­i­den­tial house property: Con­struc­tion needs to be made within three years from the date of trans­fer of LTCA.

Tax Pro­vi­sions have been am­bigu­ous and were de­bated on two main is­sues; whether one can claim de­duc­tion for in­vest­ments made in more than one house and whether such house can be sit­u­ated out­side In­dia? Th­ese two is­sues were clar­i­fied with a land­mark amend­ment made in the Fi­nance Act 2014 where the tax word­ings were sub­sti­tuted with ‘one res­i­den­tial house in In­dia’. This means that the pur­chase/ con­struc­tion can be made only in one res­i­den­tial house property and that too in the house lo­cated in In­dia. This amend­ment stood ef­fec­tive from April 1, 2015.

De­posit into CGAS: If the tax payer is un­able to utilise

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.