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Long term capital gain

SANJAY MAHESHWARI ACA ACS (Chartered Accountant) (123 Points)

07 June 2012

There is a parental resedential property purchased before 1981 which comes to the legal heir and during financial year 2011-12 the legal heir being assessee sold that property for Rs.900000/- (indexed cost being Rs.60000/-) and repurchase another resedential plot in fy 2011-12 for Rs.600000/-.

What shall be the LTCG and tax amount. Suggest some tax avoidance steps??

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5 Replies

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 07 June 2012

i suppose you have taken as the cost of acquisition the fair market value as on 01.04.1981.

Keeping that in mind, there would be LTCG of Rs. 8,40,000/- out of which 6,00,000/- was invested in new house property. In that case, Sec 54 exemption can be claimed. In it, proportionate amount of capital gains invested in new house shall be allowed as exemption. Rest amount shall be taxable @ 20% flat rate.

To save that, you can invest the balance amount in Cap Gains Account Scheme, but that would lock your money for the time specified. For the time being it would save you tax. Also, you can invest in Sec 54EC bonds within 6 months of the transfer.

Regards

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SANJAY MAHESHWARI ACA ACS (Chartered Accountant) (123 Points)
Replied 08 June 2012

IF THE ASSESSE COMES IN SLAB OF 10% THAN STILL 20% ON LTCG WILL BE LEVIABLE OR NOT??

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 08 June 2012

LTCG is always charged at a flat rate of 20% (assumed your income excluding LTCG is already above basic exemption limit)

dheeraj (student) (37 Points)
Replied 08 June 2012

If my income including LTCG is below the basic exemption limit?

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 08 June 2012

Hi Dheeraj, If your other income is below the exemption limit, then you can utilise the short amount of basic limit with your LTCG and then pay tax @ 20% on the balance amount of LTCG.

Suppose, basic limit is 180000/-, other income is 150000/- and LTCG is 100000/-. Then you can utilise 180000-150000 =Rs 30000 from the LTCG and dont pay tax on that, then on balance 70000/- i,e Rs. 100000-30000, you have to pay tax @ 20% flat.

Hope this clarifies the query.