Capital gains
This query is : Resolved
18 August 2015
Individual
residential house property
sales consideration : Rs.56 lakhs
Stamp duty value : Rs. 64 lakhs
Indexed cost of acquisition : 27.50 lakhs
LTCG Rs.36.50 lakhs.(64-27.50)
new residential house property acquired for Rs.45 lakhs.
does any tax liability arise in this case????
residential house property
sales consideration : Rs.56 lakhs
Stamp duty value : Rs. 64 lakhs
Indexed cost of acquisition : 27.50 lakhs
LTCG Rs.36.50 lakhs.(64-27.50)
new residential house property acquired for Rs.45 lakhs.
does any tax liability arise in this case????
18 July 2024
In the scenario you've described, where an individual has sold a residential house property and acquired a new residential property, let's analyze the tax implications based on the details provided:
1. **Capital Gains Calculation:**
- **Sales Consideration:** Rs. 56 lakhs
- **Indexed Cost of Acquisition:** Rs. 27.50 lakhs
- **Long-Term Capital Gain (LTCG):** Rs. 56 lakhs - Rs. 27.50 lakhs = Rs. 28.50 lakhs
2. **Exemption under Section 54:**
- Section 54 of the Income Tax Act provides for exemption from LTCG tax if the entire LTCG is invested in a new residential house property. Here are the conditions:
- The LTCG amount of Rs. 28.50 lakhs should be reinvested in the purchase of a new residential house property.
- The new residential property must be purchased either 1 year before the date of transfer of the old property or within 2 years after the date of transfer.
- Alternatively, the new property can be constructed within 3 years from the date of transfer of the old property.
3. **Investment in New Property:**
- According to your information, a new residential property has been acquired for Rs. 45 lakhs.
4. **Tax Liability Calculation:**
- If the entire LTCG of Rs. 28.50 lakhs is invested in the new residential property (which costs Rs. 45 lakhs), then the entire LTCG amount can be exempted from tax under Section 54.
- Since the LTCG of Rs. 28.50 lakhs is less than the cost of the new property (Rs. 45 lakhs), there would be no tax liability on the capital gains.
5. **Stamp Duty Value Consideration:**
- The stamp duty value of Rs. 64 lakhs is higher than the sales consideration of Rs. 56 lakhs. However, for the purpose of calculating capital gains tax, the actual sales consideration of Rs. 56 lakhs is considered.
### Conclusion:
Based on the details provided:
- The individual has incurred a Long-Term Capital Gain of Rs. 28.50 lakhs from the sale of the residential property.
- By investing the entire LTCG amount of Rs. 28.50 lakhs into the purchase of a new residential property costing Rs. 45 lakhs, the individual can claim full exemption under Section 54 of the Income Tax Act.
- Therefore, in this case, there will be no tax liability arising from the sale of the old residential property, as the entire LTCG has been invested in a new residential property within the stipulated time frame.
It's important to ensure all conditions under Section 54 are met and to maintain proper documentation to avail of the exemption effectively.
1. **Capital Gains Calculation:**
- **Sales Consideration:** Rs. 56 lakhs
- **Indexed Cost of Acquisition:** Rs. 27.50 lakhs
- **Long-Term Capital Gain (LTCG):** Rs. 56 lakhs - Rs. 27.50 lakhs = Rs. 28.50 lakhs
2. **Exemption under Section 54:**
- Section 54 of the Income Tax Act provides for exemption from LTCG tax if the entire LTCG is invested in a new residential house property. Here are the conditions:
- The LTCG amount of Rs. 28.50 lakhs should be reinvested in the purchase of a new residential house property.
- The new residential property must be purchased either 1 year before the date of transfer of the old property or within 2 years after the date of transfer.
- Alternatively, the new property can be constructed within 3 years from the date of transfer of the old property.
3. **Investment in New Property:**
- According to your information, a new residential property has been acquired for Rs. 45 lakhs.
4. **Tax Liability Calculation:**
- If the entire LTCG of Rs. 28.50 lakhs is invested in the new residential property (which costs Rs. 45 lakhs), then the entire LTCG amount can be exempted from tax under Section 54.
- Since the LTCG of Rs. 28.50 lakhs is less than the cost of the new property (Rs. 45 lakhs), there would be no tax liability on the capital gains.
5. **Stamp Duty Value Consideration:**
- The stamp duty value of Rs. 64 lakhs is higher than the sales consideration of Rs. 56 lakhs. However, for the purpose of calculating capital gains tax, the actual sales consideration of Rs. 56 lakhs is considered.
### Conclusion:
Based on the details provided:
- The individual has incurred a Long-Term Capital Gain of Rs. 28.50 lakhs from the sale of the residential property.
- By investing the entire LTCG amount of Rs. 28.50 lakhs into the purchase of a new residential property costing Rs. 45 lakhs, the individual can claim full exemption under Section 54 of the Income Tax Act.
- Therefore, in this case, there will be no tax liability arising from the sale of the old residential property, as the entire LTCG has been invested in a new residential property within the stipulated time frame.
It's important to ensure all conditions under Section 54 are met and to maintain proper documentation to avail of the exemption effectively.
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