De­posit LTCG funds for 3 yrs

The Asian Age - - Money - Ka­mal Rathi The writer is a char­tered ac­coun­tant. You can your send queries to info@rathi­and­malani.com

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.

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