I have sold a plot in Delhi in November of 2010 for Rs. 30 lacs (This plot was purchased in 2006 for Rs. 10 lacs). I want to understand what is my tax liability? Also I have purchased another flat in July 2010 (construction linked payment) in joint ownership with my son. If I am making the payments for this flat to the amount which is equal to the sale price of the plot,within a period of one year, then will I be exempt from Capital gains tax?
1 Answers
You will be able to save income tax on long term gain as per section 54F.
Below is the long term gains and income tax computation:
Purchase Year = 2006-07
Purchase Cost = 1000000
Cost Inflation Index (CII) for purchase year = 519
Sale Year = 2010-11
Selling price = 3000000
CII for sale year = 711
Indexed Purchase price = 1000000 x (711/519) = 1369942
Long term capital gain = 3000000 - 1369942 = 1630058
Income tax on capital gain = 1630058 x 20% = 326011.6
To save this tax fully, your share in new residential property must be more than sale consideration of plot (30 lacs). If its less, income tax would be applicable on proportionate basis of gain.
If possession of new house is not taken before income tax return filing of financial year in which gains occur, whole sale consideration amount has to invested into capital gains account and payment to builder/seller should be done from there.
Also, following conditions have to be fulfilled:
- Possession of new property must be taken within two years from sale of old property. Or new house can be constructed within three years of sale.
- You should not be owning more than one residential house(flat/house/apartment) at the time of buying new property.
- If total residential houses owned by you is two (including new property), you should not buy another one within next three years of purchase. Or in next three years, total owned residential houses should not be more than two.
- New property should not be sold before next three years.
Hi Pankaj,
Thanks for these details.
The new property / flat that I have purchased is the only property in my name (jointly owned with my Son) after selling the old plot (which was co-owned with my wife). However, this flat is currently under construction with a possible possession by June 2012 (which is less than 2 year of selling the old plot).
In between November 2010 (date of sale of property) and April 2011 I have made payments of 30 lakh rupees to the builder for this new flat. However, these payments were made from Saving bank account that I hold jointly with my Son.
Please suggest in such a case will I get the tax exemption for the capital gain on the property.
Secondly, I accidentally missed declaring the sale of this plot in my income tax returns filled for year 2011-12. Is there a way that I can file for amendment of my income tax returns and declare the sale of plot. Please suggest what is the procedure for doing same.
Thanks, Darshan
First, as old plot was co-owned by you with your wife, there will be tax liability for both of you (gains will be divided among you and your wife). If both wants to save tax fully, each one will have to buy property worth 15 lacs atleast. You may buy in joint ownership worth 30 lacs.
If your wife does not buy new property, she would have to pay 20% income tax on 8.15 lacs (her share of gains).
As you have already made payments to builder for amount more than your part of sale consideration, you may skip investing in capital gain bonds, but you need to file revised return now showing plot sale. You should show capital gains and exemption under section 54F.
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