Income Tax on Property Sale

Dear Sir, My Father has been Inherited with a agricultural land from his father, which my father has converted in to non agricultural property in august 2009. In June 2011 he has sold some plots out of that for an agreement value of Rs. 2000000/- and in the same month (June 2011) he had booked an under construction flat whose agreement value is Rs. 2700000/- and the total value of the flat is Rs.4700000/-. I need assistance for filling the returns. How much tax will my father has to pay? Can he avail any exemption on tax? If you can provide me your contact no. I can get in touch with you and can explain you the whole matter in details. Thanks Regards,

Pankaj Patil

asked Aug 27 '12 at 21:27 by Pankaj Patil 1135


You father may be eligible for tax benefit u/s 54F as he bought a residential house property. As cost of new flat is more than sale consideration of plot, no income tax should be payable on gains. This would be applicable if following conditions are met:

  1. Your father did not own more than one residential house properties at the time of sale of plot.
  2. He would not be selling the new residential property in next three years of possession.
  3. In the next three years, total number of residential house properties owned by your father should not be more than two.
  4. Possession of flat should be taken before June 2013 (two years from sale).
  5. If possession of flat is not taken before last date of income tax return filing date (31st Aug, 2012 for FY 2011-12), sale consideration of plot should be deposited into capital gain scheme account.

If this section is not applicable to him, then he would need to pay income tax on capital gains. Please see computation below:

Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%

If purchase year and cost is not known you should assume market prices in 1981 of the sold portion. Now as income tax would be paid late (after end of FY 2011-12), interest penalty may also be payable on pending taxes u/s 234B and 234C.

answered Aug 29 '12 at 20:24 by Pankaj Batra 5.2k320

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Asked: Aug 27 '12 at 21:27

Seen: 1,825 times

Last updated: Aug 29 '12 at 20:24