Property prices expected to fall after GST
Q: I had an old house in Pune, which I had inherited from my father. I sold it two years ago and invested the capital gains in buying another residential property. However, the new property has been registered in the joint names of myself and my brother. The assessing officer has granted exemption only for 50 per cent of the capital gains on the ground that my brother is a joint owner. Should I accept this assessment order? —R K Mahadik, Abu Dhabi
A: In case of joint ownership of the new property, courts have taken the view that full exemption of the capital gains should be given even if the new property is held jointly with another person. The condition for claiming the exemption is that the capital gains made on sale of the old house should be reinvested in purchase of a residential property. Therefore, since you have invested the full capital gains made by you upon sale of the property in Pune, you are eligible to claim exemption of the full taxable capital gains earned by you.
The fact that you have purchased the new house jointly with your brother is not relevant and this cannot be a ground for granting you exemption only in respect of 50 per cent of the capital gains made. Therefore, you should file an appeal within 30 days of receipt of the assessment order and make an application for stay of the tax demand until the appeal is disposed of.
Q: I am returning to India in November this year. I have a house in Mangalore as well as one in Kochi. I am not sure in which house I will be residing as I may decide to rent out one of the properties. As I have income from past savings, I want to know where I will be required to file my tax return. —T C Hegde, Bahrain
A: You are entitled to file your tax return within the jurisdiction of the assessing officer in the city where you reside. However, the assessment of the income may be made in future by any other officer who may not necessarily be located in the city where your return is filed. The Central Board of Direct Taxes is in the process of framing a policy to abolish the prevailing system of a tax payer being assessed in the city where he is residing. It is proposed that the assessment can be made by any officer in India.
The object of this policy is to avoid any interaction between the tax payers and officers of the tax department. The officer who will make the assessment will be chosen randomly. This will ensure objectivity in tax assessments and reduce scope for corruption. All queries will be addressed online and replies will have to be given in the same manner.
Q: With the Goods and Services Tax being introduced from July 1, there are apprehensions that the price of apartments will increase. I am planning to buy a medium size house shortly for my family. —P R Jadeja, Muscat
A: Most analysts in the real estate sector are of the firm view that the price of properties will, in fact, fall after the Goods and Services Tax is introduced. The GST rate applicable to houses and apartments is fixed at 12 per cent. However, the builder will get input credit for the GST paid on purchase of cement, steel and other building materials. Currently, the taxes on inputs are more than 12 per cent of the final price. Hence, with the input credit being available, the actual burden of taxation will come down drastically than what it was prior to 1st July.
Service tax of 4.5 per cent which home buyers had to pay will not be leviable after July 1. Hence, the real estate sector is happy with the new GST regime and it will lead to a lower tax burden for the final consumer which will help in boosting the sales of apartments, especially in the affordable housing sector.
Q: Should I accept 50% exemption of the capital gains? A: You are eligible to claim exemption of the full taxable capital gains earned by you