Happy New Days (Property Owner :- Business of Resturant & He is a Proprietor of his Business ) I want to know If I Purchase I House (Property) of Rs.150000/- on 1998-99 & Sale it for 850000/- in 09-10 and Purchase New House (Property)for Rs. 950000/- on 09-10 within 5 Month after sale of Old one.
I want ot Know Can He Show his Old House as Property with Rs.150000/- in Balance Sheet of of 1998-99 onwards to 2009-10 or not ? If yes What about Difference of Sales Price & Purchase Price of Old ? Afterthan What about Tax on New Property ? would he has to Pay tax or not ?
Pls tell me Detailed Info...about this matter and I miss Something in it Please add in your Reply
Happy New Days (Property Owner :- Business of Resturant & He is a Proprietor of his Business ) I want to know If I Purchase I House (Property) of Rs.150000/- on 1998-99 & Sale it for 850000/- in 09-10 and Purchase New House (Property)for Rs. 950000/- on 09-10 within 5 Month after sale of Old one.
I want ot Know Can He Show his Old House as Property with Rs.150000/- in Balance Sheet of of 1998-99 onwards to 2009-10 or not ? If yes What about Difference of Sales Price & Purchase Price of Old ? Afterthan What about Tax on New Property ? would he has to Pay tax or not ?
Pls tell me Detailed Info...about this matter and I miss Something in it Please add in your Reply
14 July 2024
Certainly! Let's break down the situation step by step and address each aspect:
### Sale of Old Property (1998-99 to 09-10):
1. **Purchase and Sale of Old Property:** - You purchased a house for Rs. 1,50,000 in fy 99. - You sold this house for Rs. 8,50,000 in fy 10. - There is a difference between the purchase price (Rs. 1.5L) and the sale price (Rs. 8.5L).
2. **Treatment in Balance Sheet:** - In your balance sheet, the old house (purchased for Rs. 1,50,000) should have been shown as an asset under the head "Fixed Assets" or "Property, Plant, and Equipment". - Over the years, you could have depreciated the property if it was used for business purposes or kept it at its historical cost if it was for personal use. - Upon sale of the old house for Rs. 8,50,000, you would show this amount under the head "Sale of Fixed Assets" or similar, and calculate the capital gain.
3. **Capital Gain Calculation:** - Capital Gain = Sale Price - (Purchase Price + Cost of Improvement, if any) - In your case: - Capital Gain = Rs. 7,00,000 (assuming no improvements) - This capital gain will be taxable under the head "Capital Gains" in your income tax return for the year 2009-10.
### Purchase of New Property (09-10):
1. **Purchase of New Property:** - After selling the old house, you purchased a new house for Rs. 9,50,000 within 5 months. - The cost of the new house is Rs. 9,50,000.
2. **Tax Implications on New Property:** - If you have utilized the entire capital gain amount (Rs. 7,00,000) to purchase the new house, you can claim exemption under Section 54 of the Income Tax Act. - Section 54 allows exemption from capital gains tax on sale of residential property if the entire capital gain amount is reinvested in purchasing or constructing another residential property within specified timeframes. - Since you purchased the new house within 1 year before or 2 years after the sale of the old house (within 5 months in your case), you are eligible for this exemption.
3. **Documentation and Tax Filing:** - You need to file your income tax return for the year of sale of the old property (2009-10) and claim exemption under Section 54. - Provide details of the sale proceeds, purchase price of old property, and cost of new property in your tax return. - Ensure to keep all relevant documents such as sale deed, purchase deed, and proof of utilization of sale proceeds for purchase of new property.
### Summary:
- Yes, you can show the old house purchased for Rs. 1,50,000 in your balance sheet from FY 99 to 10. - The difference between the sale price (Rs. 8,50,000) and purchase price (Rs. 1,50,000) will be treated as capital gain. - Tax on the capital gain can be exempted if the entire gain is reinvested in purchasing another residential property within the specified timeframes under Section 54. - Ensure compliance with income tax laws, maintain proper documentation, and file your tax return accordingly to claim the exemption.
If you have any further queries or need clarification on specific points, feel free to ask!
CAclubindia
