Capital Gain on sale of resident house

1. The difference of Sale price and Purchase price(after indexation) is the gain which you have made.

2. This gain is called Long term.

3. The Sale price is subject to deduction of any intermediary expenses like brokerage, etcetera.

4. The point which you have made that the proceeds had been invested in business is IRRELEVANT.

5. Definetely you have to pay tax on the Net gain apart from your other income.

anyway, this is my view only

comments of senior members are awaited.

dear rajesh

first of all since the property u sold is a kind of long term assets so calculate purchase cost after indexation.this will decrease the difference amount of ur net gain.yes sure u are required to paid capital gain tax as my friend sivasiva submitted.since the investment made by you is not fall under the provisions of sec.54. u can not claim any exemption on the basis of information u submitted.

regards

tarun rustagi

I agree with my frds Tarun & Siva.

But, If you want to save Tax on such Capital Gain You can consider Sec 54, 54EC & 54F.

agree with all of above

Dear Rajesh, obviously your capital gain will be subject to tax.

As per sec. 54, it would have been exempt, if the house is held for more than 3 years, and you purchase a new house within one year before or two years after the sale of original asset, or a new residential house is constructed within three years. The cost of new asset (residential house) should be more than the amount of capital gains.

Any other long term capital gain is exempt if the capital gains are invested within 6 months in 3 year bonds issued by REC or NHAI and that investment is retained for three years. Investment cannot exceed Rs 50 lakhs - section 54EC of Income Tax Act.

Also, you are wrong in your contention that it will be added to your total income. See, it is a LTCG, if the asset is held for more than 36 months, consequently, it will be taxed @ 20% after indexation or 10% before taxation.

AS THE ASSET IS BEING HELD FOR MORE THEN THREE YEARS HENCE IT IS A LONG TERM  CAPITAL ASSET.THEREFORE THE DIFFERENCE BETWEEN THE SALE PRICE AND INDEXED COST OF ACQUISITION WILL BE YOUR LONG TERM CAPITAL GAIN AND THEREFORE IT WOULD BE TAXABLE @ 20%.  INVESTING THE GAIN AMOUNT IN A NEW PROPRIETERSHIP BUSINESS IS NOT ALLOWED AS A DEDUCTION . 

DEAR ABHISHEK,

I'LL LIKE TO BRING TO YOUR NOTICE THAT  TAX RATE @ 10% WITHOUT INDEXATION IS NOT ALLOWED ON A RESIDENTIAL HOUSE PROPERTY . IT IS ALLOWED ONLY IN CASE OF LISTED SECURITIES,UNIT OF UTI OR MUTUAL FUND WHICH HAS BEEN HELD FOR MORE THEN 1 YEAR I.E LONG TERM CAPITAL ASSET

u wud b taxed @ 20%

as u dint take ny advice

u cant undo wat u hv done..............

Dear Friend

u have to pay tax on remaining amount

Sales Consideration                    17,50,000

Less :Indexation Cost     12,00,000* Indexation of Sold Year / Indexation of Purchased Year

        of Acquis.               (amount will be more than 12,00,000)

Less : Other Expenses : i.e Commis/Brok, etc

Remaining Long Term Capital Gain (LTCG) less utilized u/s 54, etc

Tax Payable 20% on LTCG but before this adjust amount with your Income if yours income is below than 1,60,000 (The Balance Amount).

Regards

dear friends

Mr X & Mrs X purchase house property in 2003 2,00,000/- bt the payment was made by Mr X only.. no investment from Mrs X.

the said property ws sold out in 2010 for 12,00,000/- and money received was deposited in joint account of Mr X & Mrs X .

Mr X withdrawl full amount from the account. now so please give me to whom & how much the capital gain will be taxable.

Mr X & Mrs X want to invest money u/s 54EC NATIONAL HIGHWAYS AUTHORITY INDIA so How much Mr X & Mrs X should invest & should they invest jointly in 54EC or sepertely for tax exemption u/s 54ec.

dear swapnil

if the property is in joint name then they can divide the amount of capital gain between them.they both can claim exemption according to investments.they can purchase two house or one house in joint name.

regards

tarun rustagi