Capital Gains Tax
This query is : Resolved
23 September 2009
Urgent!!!!!
We have 2 shops purchased by my grandfather in the year 1946. We have sold 1 shop in April 2009 & Second in June 2009. The shops were inherited by me & my brother through will executed in 1969. We are Individuals. I have also received certain consideration as per the Release Deed executed in April 2009. The society in which the shops are situated was formed in 1981. I have no residential property in my name. Please kindly let me know how to avoid the Capital Gains Tax. Whether i should invest in a resential property or commercial property. Whether I can purchase 2 residential property or 1 residential & 1 commercial property. What is the time limit & amount specified for it. Whether I can invest in any bonds. What is the maximum amount & time limit specified. Or can i distribute this income in my wife & 2 sons name. Suggest for other alternatives too?
We have 2 shops purchased by my grandfather in the year 1946. We have sold 1 shop in April 2009 & Second in June 2009. The shops were inherited by me & my brother through will executed in 1969. We are Individuals. I have also received certain consideration as per the Release Deed executed in April 2009. The society in which the shops are situated was formed in 1981. I have no residential property in my name. Please kindly let me know how to avoid the Capital Gains Tax. Whether i should invest in a resential property or commercial property. Whether I can purchase 2 residential property or 1 residential & 1 commercial property. What is the time limit & amount specified for it. Whether I can invest in any bonds. What is the maximum amount & time limit specified. Or can i distribute this income in my wife & 2 sons name. Suggest for other alternatives too?
24 September 2009
If its a shop(commercial property) , i guess depreciation was claimed(assuming you are in business) , so any consideration in excess of WDV will be deemed short term capital gains .
But u can invest in another shop (for business purposes) which falls in the same block of assets so that the block of assets wont turn negative . the time limit in this case would be 31st march 2010.
But u can invest in another shop (for business purposes) which falls in the same block of assets so that the block of assets wont turn negative . the time limit in this case would be 31st march 2010.
05 October 2009
Reply Urgently!!!!!
Depreciation has not been claimed on this shop. So is it possible to invest the proceeds in the commercial property under which section. Whether residential property can be purchased. If yes how many resedential property can i purchase.In case of any query see the above full question.
Depreciation has not been claimed on this shop. So is it possible to invest the proceeds in the commercial property under which section. Whether residential property can be purchased. If yes how many resedential property can i purchase.In case of any query see the above full question.
05 October 2009
Reply Urgently!!!!!
Depreciation has not been claimed on this shop. So is it possible to invest the proceeds in the commercial property under which section. Whether residential property can be purchased. If yes how many resedential property can i purchase.In case of any query see the above full question.
Depreciation has not been claimed on this shop. So is it possible to invest the proceeds in the commercial property under which section. Whether residential property can be purchased. If yes how many resedential property can i purchase.In case of any query see the above full question.
18 July 2024
Based on the details provided, here's a comprehensive approach to address your query regarding avoiding Capital Gains Tax:
### Capital Gains Tax and Exemptions:
1. **Capital Gains Calculation**:
- Capital Gains are computed based on the sale proceeds received from the shops minus the indexed cost of acquisition. Since the shops were inherited, the cost of acquisition for you and your brother will be based on the fair market value as on April 1, 2001 (assuming you choose this as the base year), unless the cost of acquisition can be substantiated with records dating back to 1946.
2. **Investment Options for Exemption**:
- **Section 54 Exemption**: This allows exemption on LTCG (Long-Term Capital Gains) from sale of a residential property if reinvested in another residential property.
- **Conditions**: You can invest in one residential property within 1 year before or 2 years after the sale of the shop, or construct within 3 years.
- Since you don't currently own any residential property in your name, this could be a viable option.
- **Section 54F Exemption**: This provides exemption on LTCG from sale of any asset other than residential property, if reinvested in a residential property.
- **Conditions**: Similar to Section 54, but you must not own more than one residential house, other than the new one, on the date of transfer.
- You can invest in one residential property within the specified time limits.
- **Investment in Bonds**: You can also consider investing the LTCG in specified bonds under Section 54EC to claim exemption.
- **Conditions**: Investment must be made within 6 months from the date of sale.
- Maximum investment limit is Rs. 50 lakhs in a financial year.
### Specific Answers to Your Questions:
- **Number of Residential Properties**: Under Section 54 and Section 54F, you can invest in one residential property to claim exemption from LTCG tax.
- **Investment in Commercial Property**: Neither Section 54 nor Section 54F allows exemption for investment in a commercial property. They specifically pertain to investment in residential properties.
- **Distribution to Family Members**: You cannot distribute the income to your wife or sons to avoid Capital Gains Tax. Each individual's tax liability is based on their own income and capital gains. Transferring income to family members for tax avoidance purposes is not permissible under tax laws.
### Alternative Strategies:
1. **Joint Holding**: Consider investing jointly with your wife or sons in residential property to maximize exemption benefits if they don’t own any other residential property.
2. **Consult Tax Advisor**: Given the complexity and significant implications of capital gains tax, consult with a tax advisor or chartered accountant who can provide tailored advice based on your specific circumstances and goals.
3. **Utilize Exemption Wisely**: Plan the reinvestment of proceeds carefully within the specified timelines to ensure compliance with tax laws and maximize tax benefits.
By carefully evaluating these options and consulting with a tax professional, you can effectively plan and manage your capital gains tax liabilities while complying with relevant tax regulations.
### Capital Gains Tax and Exemptions:
1. **Capital Gains Calculation**:
- Capital Gains are computed based on the sale proceeds received from the shops minus the indexed cost of acquisition. Since the shops were inherited, the cost of acquisition for you and your brother will be based on the fair market value as on April 1, 2001 (assuming you choose this as the base year), unless the cost of acquisition can be substantiated with records dating back to 1946.
2. **Investment Options for Exemption**:
- **Section 54 Exemption**: This allows exemption on LTCG (Long-Term Capital Gains) from sale of a residential property if reinvested in another residential property.
- **Conditions**: You can invest in one residential property within 1 year before or 2 years after the sale of the shop, or construct within 3 years.
- Since you don't currently own any residential property in your name, this could be a viable option.
- **Section 54F Exemption**: This provides exemption on LTCG from sale of any asset other than residential property, if reinvested in a residential property.
- **Conditions**: Similar to Section 54, but you must not own more than one residential house, other than the new one, on the date of transfer.
- You can invest in one residential property within the specified time limits.
- **Investment in Bonds**: You can also consider investing the LTCG in specified bonds under Section 54EC to claim exemption.
- **Conditions**: Investment must be made within 6 months from the date of sale.
- Maximum investment limit is Rs. 50 lakhs in a financial year.
### Specific Answers to Your Questions:
- **Number of Residential Properties**: Under Section 54 and Section 54F, you can invest in one residential property to claim exemption from LTCG tax.
- **Investment in Commercial Property**: Neither Section 54 nor Section 54F allows exemption for investment in a commercial property. They specifically pertain to investment in residential properties.
- **Distribution to Family Members**: You cannot distribute the income to your wife or sons to avoid Capital Gains Tax. Each individual's tax liability is based on their own income and capital gains. Transferring income to family members for tax avoidance purposes is not permissible under tax laws.
### Alternative Strategies:
1. **Joint Holding**: Consider investing jointly with your wife or sons in residential property to maximize exemption benefits if they don’t own any other residential property.
2. **Consult Tax Advisor**: Given the complexity and significant implications of capital gains tax, consult with a tax advisor or chartered accountant who can provide tailored advice based on your specific circumstances and goals.
3. **Utilize Exemption Wisely**: Plan the reinvestment of proceeds carefully within the specified timelines to ensure compliance with tax laws and maximize tax benefits.
By carefully evaluating these options and consulting with a tax professional, you can effectively plan and manage your capital gains tax liabilities while complying with relevant tax regulations.
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