Deposit LTCG funds for 3 yrs
QI am 70 years old. I bought a flat in March 1999 for `15 lakh. Now I have decided to sell it for `75 lakh and I don’t want another flat. I am incurring an expense of `2 lakh for selling. What will be my capital gain liability? If I want to deposit in government bonds, how much do I need to deposit? When and how long will I have to keep the money deposited and is it a must to buy a new flat? I am an income tax assessee and I have been filing my income-tax returns regularly till FY 2016-17, as I had some other income. During this year, I don’t have any other income. I have paid property tax for my house, will the same qualify for deduction under Section 80C? RAVINDRA Mumbai
A) The flat that you are intending to sell was purchased by you during March 1999. So you have the option of substituting the cost of purchase with the market value (as per Registrar’s office) as on April 1, 2001. The cost inflation index (base of 100) needs to be applied on the value arrived on the above date. The cost inflation index for FY 2017-18 is 272. Therefore, the market value as on April 1, 2001, substituted for the cost of purchase needs to be multiplied by 2.72 times to arrive at the indexed cost of acquisition of the property. The net sale consideration i.e., `73 lakh (after deducting brokerage of `2 lakh) minus the indexed cost of acquisition calculated above will be your long-term capital gain (LTCG). The capital gains tax will be taxed at a flat rate of 20.6 per cent on the LTCG calculated above.
The capital gains tax liability can be avoided by investing the LTCG in the capital gain bonds. The amount invested in these bonds has to be invested for a minimum period of three years. However, the investment in capital gain bonds can be reduced to the extent of the unutilised threshold limit of income tax which in your case is `3 lakh being a senior citizen. It is pertinent to note that the amount of investment has to be made within six months from the date of sale of flat and the maximum amount that can be invested in the bonds specified above is `50 lakh.
As for the deduction is concerned, If the property is let out, the property tax will qualify for deduction in computing the “Income from House Property”.
On the other hand, if it is a self-occupied house property, where the annual value of the property is taken as nil, no deduction can be claimed in respect of property tax paid in computing the “Income from House Property”. Further, the deduction in respect of property tax is available under Section 23 in computing the annual value of the property and no such deduction is permissible under Section 80C.