08 February 2021
we were staying in rental house from 1979 after redevelopment we got a flat from MMRD 10 years ago now planning to sell the same. want to know the long term capital gain tax . While buying rental flat we paid 2000 as deposit and now planning to sell the flat for 40 lakhs .
to SAve capital gain tax what measure has to be taken
09 February 2021
Can you please clarify the following: 1) What is the total amount paid for buying the above mentioned rental house? 2) What is the actual year of allotment of land?
18 July 2024
To calculate the long-term capital gains tax and explore measures to save tax on the sale of your flat obtained from MMRD (Mumbai Metropolitan Region Development Authority), here’s a detailed approach:
### Calculation of Long-Term Capital Gains:
1. **Cost of Acquisition**: Since you obtained the flat from MMRD through redevelopment, the cost of acquisition for the purpose of computing capital gains will be considered as: - The amount of deposit paid at the time of acquiring the flat.
2. **Indexed Cost of Acquisition**: Adjust the cost of acquisition for inflation using Cost Inflation Index (CII) to calculate indexed cost: - Indexed Cost = Cost of Acquisition × (CII of year of sale / CII of year of acquisition or improvement)
3. **Net Sale Consideration**: This is the actual amount you receive from the sale of the flat.
4. **Capital Gains Calculation**: Long-term capital gains are computed as: - Capital Gains = Net Sale Consideration - Indexed Cost of Acquisition - Long-Term Capital Gains Tax = 20% of Capital Gains (plus applicable cess)
### Measures to Save Capital Gains Tax:
To save on capital gains tax, you can consider the following measures:
1. **Invest in Capital Gains Bonds (Section 54EC)**: - Invest the capital gains amount into specified bonds (such as REC or NHAI bonds) within 6 months of the sale to claim exemption from capital gains tax under Section 54EC. This exemption is available up to Rs. 50 lakhs in a financial year.
2. **Purchase of Residential Property (Section 54)**: - Invest the capital gains amount in purchasing another residential property either 1 year before or 2 years after the sale of your flat, or construct a residential property within 3 years from the date of sale. Ensure compliance with the timelines and conditions specified under Section 54.
3. **Joint Investment with Family Members**: - If eligible, consider joint investment with family members to pool resources and utilize the exemption limits effectively under Section 54.
4. **Consult a Tax Advisor**: - Given the complexities involved in capital gains tax calculations and exemptions, it’s advisable to consult with a tax advisor or chartered accountant. They can provide personalized advice based on your specific situation and help optimize your tax liabilities.
### Documentation and Compliance:
- Maintain all relevant documents related to the acquisition, improvement (if any), and sale of the flat. - Ensure timely investment in specified bonds or residential property to claim exemptions under Sections 54 and 54EC. - File your income tax returns accurately, disclosing the capital gains and claiming exemptions as applicable.
By planning your investments and adhering to tax-saving measures under the Income Tax Act, you can effectively reduce your tax liability on the capital gains from the sale of your flat obtained from MMRD.
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