My wife and I booked a flat in 2009; the possession is next year. We plan to prepay the loan by selling a plot. Will there be any capital gains tax?
We have assumed that the plot which you propose to sell for prepayment of loan is owned by you and is held for at least 36 months, which makes it a long-term capital asset as defined under section 2(29A) of the Income-tax Act. As per section 54F, capital gains arising on transfer of any long-term capital asset are exempt from tax entirely/proportionately provided all/portion of the net consideration (sales consideration less selling expenses) is reinvested for purchase of a residential house within one year before or two years after the date of transfer of the capital asset. For claiming exemption under section 54F, the date of purchase of flat may be reckoned from the date of actual possession based on some court pronouncements.
Accordingly, if the flat is purchased within the specified time limits under section 54F, you shall be eligible to claim exemption from capital gains tax either entirely or proportionately depending upon the amount of sale proceeds reinvested for purchase of flat and fulfilment of certain other conditions specified therein.
I am a pensioner drawing Rs 18,000 per month. I have made few investments from which I get Rs 5,000 interest every month. Is there any tax liability on me?
As per section 10(10A), only commuted pension received under the Civil Pensions (Commutation) Rules of the Central government and other schemes applicable to government employees is exempt from tax, subject to limits specified therein. However, pension receivable on monthly basis is taxable under the head salaries in case of all employees (government or non-government). Since you are receiving pension on a monthly basis which is not commuted pension, the same shall be taxable in your hands as salary income.
Interest earned on investments is taxable unless the same is earned on investments specified under section 10(15). In case you have made investment which is specified under section 10(15), then interest earned thereon shall be tax-exempt. However, if the investments do not come under section 10(15), then the same shall be taxable. Further, if any tax has been deducted on interest, the credit for the same can be taken while computing your tax liability.
The tax liability shall be computed based on the slab rate applicable to you. In case your age is 60 years or more, then there shall be no tax on income up to Rs 2.5 lakh. Income exceeding Rs 2.5 lakh and up to Rs 5 lakh shall be taxable at the rate of 10%.
Nitin Baijal, director, BMR Advisors
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