We had constructed a home in 1995 after demolishing our ancestral home of my grandfather. We all 5 siblings are married. Now we need to promote the ancestral home in native place. Each one will obtain 10 lakhs. Will we’ve to pay any tax on it? Is there any method to save tax?
As you will have held the property for greater than 24 months, the income shall be taxed as long-term capital positive aspects. Since the home was constructed in 1995 you’ll have to take the market worth of the home as on 1st April 2001 for computing the capital positive aspects because the Fair market Value (FMV) of the home on 1st April 2001 will be taken as its price for computing your capital positive aspects. For acquiring the FMV you’ll have to get in contact with a valuer of property and acquire a valuation report from him.
Please be aware that the FMV worth of the home can’t be decrease than the stamp responsibility valuation or circle fee as is popularly recognized. On this FMV it’s a must to apply the Cost Inflation Index (CII) to reach at its listed price. The distinction between the sale costs and the listed price is the long run capital positive aspects.
It appears you all 5 siblings have inherited this property, so 1/5 of the long run capital positive aspects computed within the method defined above will develop into taxable within the arms of every one in all you. You must pay tax at flat fee of 20.80% on such long-term capital positive aspects. You can save the capital positive aspects tax both by investing the long run capital positive aspects for getting or setting up a residential home inside prescribed closing dates underneath Section 54 or by investing the long run capital positive aspects in capital positive aspects bonds of REC, NHAI, RFC or PFC inside 6 months from the date of sale of the home underneath Section 54EC.
Balwant Jain is a tax and funding knowledgeable and will be reached on jainabalwant@ gmail.com and @jainbalwant on Twitter
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