Is there any other exemption available, apart from investment in specified bonds, to each co-owner separately on sale of a co-owned flat?
Under section 54 of the Income-tax Act, 1961, the long-term capital gains (LTCG) resulting from sale of flat can be claimed as exempt from tax by re-investing the gains into one new house located in India, subject to specified conditions. The co-owner wishing to claim the exemption should make the investment to the extent of her own share of LTCG within the specified time frames, i.e., within one year prior to sale date or two years from the sale date or within three years for an under construction flat.
The exemption is restricted to LTCG or cost of new house, whichever is lower. But the new house should not be sold within three years, else the exemption stands revoked in the financial year (FY) of sale of new house. If one is unable to invest LTCG in a new house by the due date of filing the tax return, one should deposit the gains in the Capital Gain Account Scheme (CGAS) with a prescribed nationalised bank to be able to claim this exemption, subject to conditions. The amount deposited should be used to buy a new house within aforesaid time frames. If one is unable to do so, the unutilised amount will be taxable as LTCG in the FY in which three years from sale of flat lapse.
My father has a postal fixed deposit (FD) with a monthly payout that goes into a recurring deposit (RD). He says post office does not calculate yearly interest for recurring deposits. Is RD interest tax-free? Don’t banks or post offices deduct tax on source (TDS)? If it is taxable, is there any tax deduction available under Chapter VI-A of the Income-tax Act, 1961?
Interest earned on post office RDs or FDs is taxable under ‘Income from other sources’. Even if the tax is not deducted on the aforesaid interest, it should be offered to tax. Your father would be eligible for tax deduction under Chapter VI-A of the Act for specified investments or expenditure from his total income. But re-investment of post office FD interest into RDs does not qualify for any tax deduction under Chapter VI-A of the Act.
If your father’s total income during the FY does not exceed the applicable basic income exemption limit, no tax would be payable by him. Else, he would be required to pay appropriate tax on his own through advance tax route as per specified instalments during the FY or by way of self- assessment tax at the time of filing his return of income.
Further, if your father qualifies as a resident senior citizen (age 60 years and above during the FY) and he does not have income from a business or a profession, he is exempted from paying tax in advance during the FY. He can pay tax on RD or FD interest after the FY ends on 31 March as self-assessment tax on taxable income before filing his tax return.
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