PPF can be in kid’s name

Q■ In 1999, my sister and I constructed two separate but similar houses on the land inherited equally from our father in 1992. The cost of construction was ` 20 lakh for each one of us individually. We are now proposing to sell the property which is expected to get around ` 2 crore on its sale. What will be the long term capital gains liability? Our father purchased this land in 1980. I wanted to know the valuation of the property after claiming the indexation benefit provided in the Income- Tax Act. RAJENDRAN

Via mail

You

will be liable to pay tax on the capital gain arising on the sale of property individually. As the property has been held by you for more than 24 months, the gains arising on sale will be taxable as long- term capital gains ( LTCG). You will need to determine the fair market value of the property as on April 1, 2001, on the basis of valuation as per registering authorities. You have the option of adopting the Fair Market Value for the property as on April 1, 2001, or the actual cost incurred on the property ( including the cost of land incurred by your father). After determining the cost of acquisition of property, it will be indexed using the cost inflation index for FY 2001- 02 ( which is 100) and the FY of sale ( assuming 2018- 19 which is 280). The difference between the net sale consideration ( after payment of brokerage if any) and the indexed cost of acquisition after applying the cost inflation index will be the taxable LTCG.

The LTCG is taxed at the rate of 20.8 per cent. However, the option of investing the LTCG in a residential house within a specified period or investment of LTCG in capital gains bond specified under section 54EC within six months from the date of sale to be held for 5 years, are available to avoid/ reduce the tax liability.

QSection 80C of the I- T Act allows deductions of contributions made by any individual towards PPF Scheme from the total income for the fiscal year. Can I invest in PPF in the names of children who are earning and married too. JITENDRA Via e- mail

Under

Section 80C, contributions to PPF Scheme, an individual can invest in an account standing in his or her name; spouse and his or her children are eligible for deduction.

The child could be a major or minor son or daughter, married or unmarried son or daughter. However, contribution to be made during each financial year cannot exceed ` 1,50,000 under this scheme.

( The writer is a chartered accountant. He can be contacted at info@ rathiandmalani. com)