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Capital gain

Arunashree ( Finance Manager) (117 Points)

10 March 2010

A person sold a land (Long term asset)& recd Rs. 67 lacs(this Rs.67 lacs is capital gaini.e after deducting cost of acquisition )),Pl tell me what all can he do to to pay minimum tax.His family consist of his wife ,he himself(senior citizen),his son(married)&daughter(mentally retarted but married,daughter having two kids).

Pl reply as early as possible with detailed procedure.

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13 Replies

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 10 March 2010

Dear wani

plz clarify if the land wa used for agri purpose

karthi

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Arunashree ( Finance Manager) (117 Points)
Replied 10 March 2010

no its is not an agricultural land

llllVICTORllll (Internal Auditor) (511 Points)
Replied 10 March 2010

Details regarding if it is agricultural land to be known, if it is situates within contonment or municpality limit also to be known to give a satisfactory answer

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 10 March 2010

Dear wani

these are the various options available

1) the person does not purchase any asset after selling the land then the entire capital gails will be taxed.

2) if the land is an agri land, if the tax payer is an individual ,the land wa sused for agri purpose by him ot his parents for a period of not less than 2 years and if he purchases another agri land within 2 years form the date of transfer. incase of compulsory acquisition then the 2 years will be calculated from the date when he received the amount. until such time he has to deposit the amount in the "capital gains Deposit account scheme" then the to the extent of the deposit and or purchase of land the capital gains is exempt. sec54B

3} Sec 54EC sale of any long term capital asset, if the capital gain portion is invested in bonds issued by NHAI REC ONDS, redeemable after 3 years, the amount invested is exempt.

4) SEc 54EF Transfer of a long term capital asset other than a residential house ex a land as in ur case- if a residential house is purchased with in a period of 2 years from the date of transfer ot 1 year prior to the date of transfer, or constructed with in aperiod of 3 years from the date of transfer, thenthe amout used for the purchase or construction is exempt from capital gains- plz note that this new house could be purchsed outside india too

regards

karthi

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 10 March 2010

the 4 point is sec 54 F

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karthikeyan.v (Chartered Accountant) (523 Points)
Replied 10 March 2010

dear wani, if my answer is not enough plz letme know

karthi

C.Balaji (Learner) (1867 Points)
Replied 10 March 2010

Dear WANISHREE NAIDU C,ACA..........

The Land sold is a Non-Agricultural Land........

Therefore, there are two sections available to claim exemption from sale of Land (LTCA)....

Section - 54 F & Section 54 EC.........

Sec 54 F - Transfer of LTCA other than Res. house and Pur / construction of Res. house.....

Sec 54 EC - Transfer of LTCA and investment in Specified bonds within 6 months from the date of sale / transfer........

Arunashree ( Finance Manager) (117 Points)
Replied 10 March 2010

Is there any other option available to him coz he's 80yrs old & doesnt want to invest in bonds (coz its non-transferrable & he does not want to take any risk).

If the capital gain is not utilised fully then the unutilised amount can be deposited in a bank under capital gain account scheme.can u pl tell what is cap. gain a/c scheme & also tell whether there is any other possibility for him to minimise tax.

KRISHNA PALLAVUR (CA FINAL) (79 Points)
Replied 10 March 2010

Dear,

Ask that person to invest the amount in purchase of house property u/s 54 F and take reverse mortgage from a bank and encash the building..

Simple

Regards

KRISHNA

Prasanth Nair V (ACA,ACS,CWA Final,Mcom) (557 Points)
Replied 10 March 2010

Dear WANISHREE, There are only two ways for claiming ex. Under section 54EC and 54 F. The unutilised money can be put Capital Gain account Scheme, but there are time limit.

I have another suggestion.

Purchase a Residential House property With the Amount and Mortgage it with any Bank under Reverse Mortgage Scheme..

Thus You can Avoid tax and at the same time ensure Periodical earnings or Lumpsum Amount based on terms and conditions of the bank.

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KRISHNA PALLAVUR (CA FINAL) (79 Points)
Replied 10 March 2010

Dear,

Ask that person to invest the amount in purchase of house property u/s 54 F and take reverse mortgage from a bank and encash the building..

Simple

Regards

KRISHNA

c v ramana (Tax practitioner) (62 Points)
Replied 11 March 2010

Deposits under Capital Gains Account Scheme 1988

Relevant Extracts:

4. Types of deposits.- (1) There shall be two types of deposit accounts, namely :—

(i) “Deposit account-A”; and

(ii) “Deposit account-B”.

(2) The deposit made under account-A shall be in the form of ‘savings deposit’ and subject to the other provisions of this Scheme, withdrawals under this account can be made from time to time by the depositor.

(3) The deposit made under account-B shall be in the form of ‘term deposit’ with an option to the depositor to keep the deposit as cumulative or non-cumulative deposit. Except as provided under paragraph 7 and paragraph 9, withdrawals under this account can be made only after the expiry of the period for which the deposit under this account has been made and accepted.

(4) Such deposits may be made in one lump sum or in instalments at any time on or before the due date of furnishing the return of income under sub-section (1) of section 139 of the Act as is applicable in the case of the depositor.

9. Withdrawal from the account.- (1) A depositor having account-A may, at any time after making the initial subscripttion, if he so desires, apply in Form C or as near thereto as possible, together with the pass book to the deposit office for the withdrawal of amount from the balance to his credit in account-A, subject to the other provisions of this Scheme.

(2) On receipt of an application under sub-paragraph (1) the deposit office shall, subject to the provisions of sub-paragraph (3), permit the withdrawal and enter the amount withdrawn in the pass book.

(3) At the time of any withdrawal from account-A, other than the initial withdrawal, the depositor shall furnish in Form D in duplicate the details regarding the manner and extent of utilisation of the amount of immediately preceding withdrawal. The deposit office will retain one copy of Form D and return the other copy to the depositor after duly authenticating it.

(4) Where the amount of withdrawal referred to in sub-paragraph (2) exceeds rupees twenty-five thousand, the deposit office shall make payment to the depositor, subject to the fulfilment of the conditions prescribed in sub-paragraph (3), by way of crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment.

(5) A depositor intending to make withdrawal from his deposit in account-B, shall first apply in the manner prescribed in sub-paragraph (2) of paragraph 7 for transfer of the amount standing to his credit in account-B to account-A and may withdraw the requisite amount in the same manner and subject to the same conditions as stipulated in sub-paragraphs (1) and (3) after the amount standing to the credit in his account-B has been credited to his account-A by the deposit office.

(6) In case the application under sub-paragraph (5) is made before the expiry of the specific period for which the deposit in account-B was made, such withdrawal will be treated as premature withdrawal, and the amount of interest accrued, if any, shall be calculated subject to the provisions of sub-paragraph (4) of paragraph 8.

(7) On receipt of the application under sub-paragraph (5), the deposit office shall transfer the amount due and payable, together with the amount of interest accrued, in account-B, to account-A in the same manner and subject to the same conditions as stipulated in paragraph 7 and thereafter allow the request for withdrawal made by the depositor in the same manner and subject to the same conditions as stipulated in sub-paragraphs (1), (2), (3) and (4).

Explanation : For the removal of doubts, it is hereby clarified that the deposit office shall refuse the depositor to withdraw any amount lying in his account, in case of failure on his part to furnish all the details as required by sub-paragraph (3).

10. Utilisation of the amount of withdrawal.- (1) A depositor, withdrawing any amount out of the deposit made in pursuance of sub-section (2) of section 54 or sub-section (2) of section 54B or sub-section (2) of section 54D or sub-section (4) of section 54F or sub-section (2) of section 54G, shall utilise the whole or any part of the amount so withdrawn for the purposes specified in sub-section (1) of the section in relation to which the deposit has been made.

(2) The amount withdrawn shall be utilised by the depositor within sixty days from the date of such withdrawal for the purposes specified in sub-paragraph (1) and the amount or any part thereof which has not been so utilised shall be re-deposited in account-A immediately thereafter.