We bought a flat on behalf of our company at the initial stages of construction. The money was paid over three years. The builder has executed an agreement to sell and a construction agreement with the company. In the fourth year, we sold the flat before the registration was done. The sale took place through the builder and the buyer got the apartment registered in his name. Since the apartment was not registered in our name, do we need to pay capital gains tax?
Section 2(14) of the Income-tax Act has defined the term capital asset to mean property of any kind held by an assessee. The term “property” is of the widest import and signifies every possible interest which a person can clearly hold and enjoy. Further, the term “transfer” as defined under section 2(47) includes extinguishment of rights within its ambit. In your case, the company is enjoying certain rights under the agreement to sell entered into with the builder in respect of the apartment (assuming it was ready for possession at the time of transfer), which shall constitute “capital asset”. Accordingly, any rights transferred in respect of such capital asset to any person would attract capital gains tax. Hence, compensation received by the company shall be chargeable to capital gains.
My bank has deducted tax at source for interest from my fixed deposit. Do I have to pay tax on the balance earnings?
If there are other streams from which income is being generated, you would need to calculate your total tax liability at the end of the year by taking all streams of income and applying slab rates to the total taxable income (including interest income).
Against your total tax liability for the year, you shall be entitled to claim credit of taxes deducted and deposited by the bank from the interest income on your behalf. After claiming credit of tax deducted at source and any other prepaid tax (such as advance tax, if any tax is still left to be paid, you will have to pay the same as self-assessment tax (along with applicable interest) before filing your returns.
Is long-term capital gains (LTCG) tax applicable on sale of land held for at least three years?
Section 2(14) defines capital asset to mean property of any kind with an exception inter-alia of agricultural land. Further, any asset which is held for at least three years is considered long-term capital asset. In case land held by you is not an agricultural land, the same shall be considered to be a capital asset. Hence, any sale of such land that is not an agricultural land shall be liable to LTCG tax if the same is held for at least three years. Also, it may be possible to claim exemption on such LTCG, subject to certain conditions.
Nitin Baijal, director, BMR Advisors
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