Tax planning on Capital Gain

avinash chauhan 1
Viewed 1293

Sir, Please help me out, A person has sold a open plot to an builder in consideration of 3 residential flats of each costing Rs.20 lacs. in his name, out of which he sold 1 flat for Rs 20 lacs immediately (say after 6 months) & kept rest of the 2 Flats with himself. Now he also owned previously 1 (one) Residential Flat which he sold after selling the above said property for Rs.25 lacs & purchased immediately a residential flat for Rs.75 lacs(in Co-ownership with his wife) in which he presently staying with his family. All this transactions took place in the same year, so please suggest me the best tax planning i would go for and try to save the maximum tax.

Regards, Avinash

section-54c plot-sale section-54f long-term-gains section-54 capital-gains
1 Answers

Transactions can be divided in following parts:

  1. Sold plot for 60 lacs
  2. Bought 3 flat at 20 lacs each
  3. Sold one flat for 20 lacs
  4. Sold one flat for 25 lacs
  5. Bought new flat for 75 lacs in joint-ownership

Case 1: Long term capital gains has to be computed based on purchase year, purchase cost, selling year, selling price=60 lacs with indexation rules (Assuming plot is sold after keeping for atleast three years). Income tax would be payable on the gain computed at rate of 20%. To save this income tax fully, either whole sale consideration amount (60 lacs) can be invested into another residential house property (section 54F) or amount may be invested into capital gain bonds (section 54EC).
Section 54F has conditions that one cannot own more than one residential house property at the time of buying new one or total owned houses not even than two in next three years too. So person becomes ineligible for this section as he owns more than that.
Section 54EC can be used to save tax here. Maximum 50 lacs can be deposited to capital gain bonds in a financial year and investment has to done within six months of sale.

Case 2: No issues.

Case 3: Short term gains will be applicable here as flat is sold before three years. But as purchase and selling cost are equal no income tax would be payable as no gain will come out.

Case 4: If flat has been kept for three years, long term capital gains will be applicable and same needs to computed. 20% income tax is payable on this long term gains. Income tax can be fully saved under section 54F by investing only the gains part into a new residential house property within next two years or one year before sale. Or capital gain bonds can be purchased under section 54EC.
As new flats have been purchased within duration of one year before and two years after, section 54F will apply and no income tax would be payable on this gain. New jointly owned flat cost share will be 37.5 lacs which is already more than selling price.

Case 5: No issues.

But having said all these, As your case is complex one, I would still request you to consult a tax professional to clarify things.

Pankaj Batra5212
Related