`50L cap on LCGT investment

THE INVESTMENT OF LONG CAPITAL GAIN BONDS IS RESTRICTED TO `50,00,000 AS PER THE PROVISIONS OF SECTION 54EC OF THE INCOME-TAX ACT

QI am 72 years old. I bought a flat in Mumbai in January 1999 for `15 lakh, which I sold for `1.15 crore in March 2017. As I am already old, I don’t want to purchase a flat. In such a scenario, what will be my capital gain tax? If I want to deposit in government bonds, how much do I need to deposit? When and how long will I have to keep my money parked in the bonds? Or is it is a must to buy a flat? I am incurring an expense of `2,30,000 for selling the flat.

I am an income-tax assessee and filed my return regularly till financial year 2015-16, as I had some other income. During this year, I don’t have any other income. Kindly suggest me the best possible way to save income-tax on this transaction. The buyer has also collected income tax of `1,15,000 before making the balance payment. RAMANI SUNDARAM Chennai

The long-term capital gain on the sale of your flat purchased during January 1999 works out to `64.62 lakh which is computed as under:

Net sale consideration is 1,12,70,000 (1,15,00,000 2,30,000) and Indexed cost of acquisition 48,07,690. The indexed cost of acquisition is computed after applying the cost inflation index of respective years, as follows:

15,00,000 x 1125/351 i.e. 48,07,690

The long term capital gains are taxed at a flat rate of 20.6 per cent.

The capital gains tax liability can be avoided by investing the long-term capital gains in the capital gain bonds specified under Section 54EC.

The amount invested in these bonds has to be invested for a minimum period of three years. However, the investment in capital gain bonds is restricted to 50,00,000 as per the provisions of Section 54EC of the Income-Tax Act. On the balance amount, income tax at the rate of 20.6 per cent is to be paid at the time of filing of income-tax return. The unutilised threshold limit will also be reduced from the balance leftover after investing in the capital gains bond (in your case, `300,000 being senior citizen)

You must note that the investment in capital gain bonds has to be made within six months from the date of sale of property in question. You will get the credit for the tax deducted by the buyer, which can be set off against the tax payable by you. Q

I am a retired officer drawing a pension of `18,000 per month. Now I am working as a consultant in a private company. They have agreed to pay me `24,000 as consultancy fees and `3,000 towards conveyance charges towards my travelling from my home to the office by my own car. Please suggest how to calculate the income tax on the below three items, Viz., pension, consultancy fees, conveyance charges.

VIJAY REDDY

Hyderabad

The consultancy fees received by you as a consultant will be taxed under the head “Profits & Gains from Business or Profession”.

You will be eligible to claim any expenditure incurred wholly and exclusively for the purpose of carrying your business or profession. However, the excess of conveyance amount to the extent not incurred also needs to be included in your total income since the amount is already claimed as expenditure by the concerned firm.

The pension amount received shall be taxed under the head “Salaries”. You need to calculate your income tax liability after claiming the deductions under Chapter VIA i.e. under Section 80C, 80D, 80G etc.

The total income arrived after claiming the above deductions will be taxed depending on the threshold limit applicable to you as fixed by the government for the relevant financial year.