I am a senior citizen and purchased a property in 2004 for Rs 1.30 lakh. Stamp duty and registration fees for the same was Rs 37,000. I sold it in December 2010 for Rs 2 lakh. What amount will be considered as capital gains? Do I have to pay any tax if my total income, including the capital gain, does not exceed the permissible limit of Rs 2.40 lakh?
Based on the information provided by you, the long-term capital gain on the sale of property will be sale consideration of Rs 2 lakh less indexed cost of acquisition, i.e. Rs 1.67 lakh/480*711) = Rs 2,47,369. So, the long-term capital loss is Rs 47,369.
In your case, there is a long-term capital loss and the same shall not be taxable. Such loss can be set off against income under the head long-term capital gain only and can be carried forward for a period of eight years. If your total income including capital gains (if any) does not exceed the maximum amount not chargeable to tax (i.e Rs 2.40 lakh in case of senior citizens), then you are not required to pay any tax.
I bought a house along with my wife in the current fiscal. We are co-owners and the loan is also taken jointly. Can we both claim tax benefit of Rs 1 lakh each on the principal amount and Rs 50,000 each on the interest payment? Also, we have rented out this house and live in a rented house ourselves. The rent income is shown in our returns. Can I claim house rent allowance (HRA)?
You and your wife can claim tax benefit of Rs 1 lakh each and also claim the deduction of interest under section 24 of the Income-tax Act. You would also be entitled to claim HRA provided rent is paid by you.
We purchased land in 1995. A part of the undivided land is now being given to a builder in exchange for a constructed residential property of about 2,800 sq. ft. If the constructed property is taken as two units of, say, 1,500 sq. ft and 1,300 sq. ft in land owner’s name, will there be any long-term capital gains? How can it be avoided?
Any gain on sale of any capital asset is liable for capital gains tax. In this case, there is sale of land to the builder to the extent the undivided portion of land is proposed to be given in exchange of new residential units to be given back by the builder. Accordingly, the market value of the constructed property (excluding land) will be the sales consideration from which the indexed cost of land, which is being given to the builder, will have to be deducted. The balance amount will be the amount of capital gains on which tax is payable. However, the value of the construction is deemed to be your investment in a new house property and therefore you can claim exemption under section 54F of the Income-tax Act.
Sachin Vasudeva is senior partner, SC Vasudeva and Co. Chartered Accountants
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