Government bonds for saving LTCG must be bought within 6 months of selling house
Long-term capital gain tax is payable if you sell a property after holding it for less than 24 months. If you buy government-notified bonds with this capital gain, this gain may not be taxed
Recently, I sold some property and know that the transaction will invite capital gains tax liability. My query is, when and how much should I pay as tax?
Following are the details of the property:
—Bought in 2009-10
—Cost was Rs20.50 lakh (including brokerage and stamp duty)
—Sold in June 2017
—Price was Rs42 lakh with Rs85,000 as brokerage.
How much would be the tax liability? If I want to purchase capital gains bonds, when should I do so? How much time do I have to buy them so that I can avoid paying fines and charges, as well as legal and tax-related issues later on?
The gain arising from transfer of property attracts capital gains tax. Since you have held this property for more than 24 months, the resultant gain is taxable at the rate of 20.60% (plus applicable surcharge) as a long-term capital gain (LTCG).
The tax liability will be calculated as follows:
Step 1: Calculating the cost of acquisition (Rs20.5 lakh).
Step 2: Calculating the indexed cost of acquisition, which is the cost of acquisition * cost inflation index (CII) in the year of sale / CII in the year of acquisition (Rs20.5 lakh *272/148 = Rs37,67,568).
Step 3: Calculating the LTCG [Rs41,15,000 (net of brokerage expenses)– Rs37,67,568 = Rs3,47,432)].
Step 4: Calculating the tax on LTCG (Rs3,47,432 * 20.60% = Rs71,571).
Step 5: Applying applicable surcharge depending on your total income for FY2017-18.
The resultant LTCG could be claimed exempt from tax if the gain is re-invested in the specified manner. One such reinvestment that qualifies for the exemption is the purchase of government-notified bonds (to the extent of the LTCG) within 6 months from the sale of the property). The other alternative available for claiming exemption from long-term gains tax is by re-investing the sale proceeds in another property within prescribed timelines. If such reinvestment is not made, the LTCG or part thereof would be taxable.
My parents gifted me Rs75,000 on my birthday last month. I plan to use it for investments. What will be the tax implications? Will both my father, from whose account it was credited to mine, and I be taxed for this?
We have assumed that you are a major (i.e., more than 18 years of age).
Under section 56 of the income tax Act, any sum of money, the aggregate value of which exceeds Rs50,000 received by an individual during the FY without consideration, is taxed under the head ‘Income from other sources’ in the hands of the recipient.
However, an exemption is allowed if the cash is received from a relative, which includes, among others, parents of the individual. Accordingly, there should not be any tax implication in your or your parent’s hands.
However, any subsequent income from investment of the money shall be taxable in your hands depending on the nature of income.
I was a non-resident Indian till February 2015, which is when I came back to India. I got a job in August 2016. However, I am currently outside the country and will be back only around September. I could file taxes online but will not be able to arrange for all the documents from afar and I don’t want to file an incomplete return. Is it possible that I file my return for 2 years together, while filing return for the financial year 2018-19?
You are required to file your India tax return by specified dates—31 July 2017 for individuals in respect of your income for the period 1 April 2016 to 31 March 2017 (FY 2016-17). While you may be unable to collate documents and supporting material in order to prepare your tax return, since you are currently not in India, do note that Indian tax laws do not permit an extension of due date.
In case you are unable to file your return on or before 31 July 2017, you may file a belated tax return for FY2016-17 at any time before 31 March 2018. A belated return would result in additional interest consequences on the tax payable and disallowance of the carry-forward or set-off of losses in certain cases. Additionally for FY2016-17, a penalty of Rs5,000 may be levied at the discretion of the tax authorities for filing a belated return.
You may, therefore, opt to file a return before the due date for FY2016-17 and subsequently revise the same, if necessary, before 31 March 2019 or completion of assessment by the tax authorities, whichever is earlier.
Parizad Sirwalla is partner (tax), KPMG.
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