Dear Pankaj, You are doing excellent job. My Q is i have purchased a plot of 6.0 lakhs in joint name with my wife in year 2003. now i want to sell it for a price 1.50 crore. further i want to buy a plot of appx. 1.0 crore and a flat of appx. 50.0 lakhs. We both have no other house in our name. Can i do this under rules saving capital gains tax. If not. Plz advise me aright way to purchase a plot & flat. To do this in any way plz suggest me the tax calculations.Urgent Plz.
1 Answers
Below is the computation for long term capital gains and income tax:
Purchase Year = 2003-04
Purchase Cost = 600000
Cost Inflation Index (CII) for purchase year = 463
Sale Year = 2011-12
Selling price = 15000000
CII for sale year = 785
Indexed Purchase price = 600000 x (785/463) = 1017279
Long term capital gain = 15000000 - 1017279 = 13982721
Income tax on capital gain = 13982721 x 20% = 2796544.2
As you sold a plot, section 54F can be applied to save income tax on capital gains.
Under this section, you will have to buy a residential property within two years of sale of plot or within one year before sale. You may also construct a house within three years of sale. To save tax fully, whole sale consideration amount has to be invested in new property. If less amount than sale consideration is invested, income tax will be applicable in similar ratio, in which the amount is less.
If you want to buy plot, no exemption can be taken unless you construct a house on it within three years.
I am assuming that old plot was jointly owned by you and your wife with equal share (50-50). In that case, both of you would have to invest 75 lacs each individually to save income tax fully.
You can buy two residential houses for 75 lacs, one in your name and one on your wife's. Or you can buy one house worth 1.5 crore in joint ownership.
Say, if you buy a 80 lacs property and your wife buys 50 lacs property, then there won' be any income tax payable by you and income tax payable by your wife will be = 20% of ((13982721/2) - ((13982721/2) x 50/75)).
Dear Pankaj thnx for quick reply but still i have some doubts 1. Can we purchase the two properties in joint name or we have to purchase it separate individually 2. If first property a flat is purchased for 55.00 lakhs from builder. Can one spend more 20.00 lakhs in improvement & registration of this flat from the capital gain money to make it 75 lakhs. 3. If second property a plot is purchased for 75.00 lakhs. can one spend more 20.00 lakhs in construction of the house with in three years from other savings to get C G tax rebate.1.
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You cannot purchase two properties jointly as exemption can only be availed only for a single property. You can either buy two (one each individually) or single with joint ownership.
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Yes, registration amount and further construction amount can be added to new house cost.
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Yes, a plot can be purchased and a new house can be constructed on it within next three years from sale. Total plot cost + construction cost can be counted to claim tax benefit.
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