Lower value of property may attract taxmen notice
QWe have received a notice under Section 50C of the IncomeTax Act. My father and my four uncles jointly sold their ancestral property. They divided the sale proceeds among themselves. With this money, they purchased agriculture land, residential lands and also constructed a residential house. However, now they have been iss-ued notice under Section 50C with a demand to pay LTCG. Is their any provision to claim exem-ption from paying LTCG? Kindly clarify. GOPI KRISHNA
via email
A) Your query is silent on the date and cost of purchase of the property, nature of property as to whether it was a plot of land or residential house, date of inheritance of property, etc. The long-term
capital gain (LTCG) or sale consideration to the extent of amount invested in the residential house within the specified time can be claimed as deduction from the LTCG computed.
The provisions of Section 50C will be applicable when the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such asset, such value adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer.
When the assessee claims before Assessing Officer that the value so adopted or assessed or assessable by the authority for payment of stamp duty exceeds the fair market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to a valuation officer.
If the value ascertained by such valuation officer exceeds the value adopted or assessed or assessable by the stamp authority, the value adopted or assessed or assessable will be taken as full value of the consideration received or accruing as a result of the transfer.
Therefore, if the LTCG/ sale consideration is invested in the purchase of a residential house, exemption can be claimed on fulfilment of certain conditions. It will also be subject to satisfying the conditions laid down under Section 50C mentioned above.
QI have taken an educational loan from a bank for the education of my son and daughter in 2014 and I have been paying interest since then. For how many years can I continue to claim the deduction under Section 80E? SHIV RAMAKRISHNA
via email There is no ceiling on the deduction and it can be claimed for a maximum period of eight assessment years, beginning from the initial assessment year and for seven successive assessment years or until the interest on such loan is paid by the assesse in full, whichever is earlier. Therefore, in your case, if the criteria for higher education is satisfied, the entire amount of interest will qualify for deduction under Section 80E. Higher education for the purpose of Section 80E will mean full-time studies for any graduate or post-graduate course in engineering, medicine, and management or for post-graduate courses in applied sciences or pure sciences including mathematics and statistics.