Invest gains from land sale in capital gain bonds
QI retired from a private company 10 years before, now my age is 66 years. After my retirement, I am not submitting any income tax return as I am earning below the exemption limit. Now I want to sell my plot of land for 20 lakhs. The plot was purchased by me in May 2002 for ` 15,000. Kindly clarify whether amount that I am getting is taxable? What is the tax liability for me? Please clarify if I want to submit the return which type of form I have to file to show other incomes and total sale consideration of the land?
RAMANUJAM Hyderabad
A) The sale of plot will result in long term capital gains ( LTCG) and you will be liable to pay income tax @ 20.6% on such long term capital gain. The amount of ` 15,000 invested in May 2002 shall be eligible for the cost inflation index. However, since the amount invested is very small even after applying the cost inflation index the amount of indexed cost of acquisition may come to around ` 38,857 ( approx). The capital gains tax liability can be avoided if the long term capital gains are invested in Capital Gain bonds specified U/ s 54EC of the Income Tax Act, 1961. ITR 2 is the appropriate return applicable in your case assuming that you have no business income. Further, in the case of individuals & Hindu undivided families where the total ( taxable) income as reduced by long- term capital gain, is below the basic exemption limit, the long- term capital gain will be reduced to the extent of the short fall and the balance long- term capital gain will be subjected to the flat rate of income- tax specified above.
QI wish to gift my house - ground plus 2 floors to my son, what is my gift tax liability. Secondly the said property is fetching a rent ` 40,000 plus, I wish to retain the rent on my name or can I ask the tenant to give the rent on my wife’s name so that I reduce my income tax, can a deed be made and registered so that the property is legally on my son’s name and at the same time be financially independent, I am a retired pensioner and my son is doctor having his own income. After our life time my son will get 2 floor rent and my daughter 1 floor rent this can be included in the deed to be made, kindly advice.
SATVIK Hyderabad
A) It will be advisable that you make a “Will”, instead of a gift deed since your son also has his own source of income. The Will which you make should specifically mention the details of all the assets, both immovable and movable and name of the person who will inherit the said asset. There is no tax liability on any property which is acquired through inheritance, or any gift tax liability if the property is transferred to relatives.