I had purchased a flat in 2000 for Rs 4 lakh and its present market value is Rs 18 lakh. I want to sell this flat and purchase a new flat for Rs 17 lakh. Will the capital gain tax be exempted if the gain is less than the cost of the new flat? To avail the exemption should I invest only the capital gains or the entire consideration in the new flat ?
As per the provisions of section 54 of the Income-tax Act, capital gains arising from transfer/sale of a residential property which is held by the transferrer for a period exceeding 36 months is exempt from tax to the extent such gains are reinvested for purchase of a new residential property within one year before or two years after the date of such transfer. Given that the flat was held by you for a period exceeding 36 months, you shall be entitled to claim exemption on capital gains. Further, the quantum of exemption under section 54, shall be the amount of capital gains reinvested for the purchase of a new flat within the specified time limits. However, if you are not able to purchase the new flat before the date of furnishing the return of income for the year in which such gain arises, then exemption under section 54 can be claimed by depositing the capital gains in a specified bank before the due date of furnishing such return.
My parents had purchased a house in 1980 for Rs 30,000 and now, as per the current circle rate, its selling price is around Rs 96 lakh. If my parents buy a house of Rs 50 lakh within 2-3 months and give Rs 2 lakh in charity, can they save on long-term capital gains (LTCG) tax?
For the purpose of computing LTCG on transfer of property, the sales price shall be reduced by the indexed cost of acquisition. For the purpose of computing the indexed cost of acquisition, the cost of acquisition of property shall be taken to be the lower of the actual purchase price (Rs 30,000) or the fair market value of the property as on 1 April 1981.
The LTCG arising on transfer of residential house shall be exempt under section 54 to the extent the sale proceeds are invested for the purchase of another residential house within one year before or two years after the date of transfer. However, where investment in the new residential house is not made before the due date of furnishing of return for the financial year in which the transfer took place, then exemption can be claimed only if such capital gains is deposited in a capital gain account scheme before the due date of filing the return of income.
The amount given in charity will not reduce your long-term capital gain tax liability. However, it can be claimed as a deduction under section 80G if the institution to which the amount is donated is a specified association.
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