I had purchased two adjoining plots in March, 2003 for ₹6 lakhs each. One was purchased in my establish and the second was purchased in my partner’s establish. I had paid for every these plots. Now I want to advertise every the plots and rely on to get spherical ₹75 lakhs. I’m a salaried specific particular person and my partner is dwelling maker. How can we get exemption from Long time interval capital constructive features on sale of these plots? I private two residential flats in my establish.
Answer: Purchase of the other plot by you in your partner’s establish is likely to be dealt with as current made by you to your partner. As per the provisions of Section 64 of Income Tax Act, when an asset is offered by one accomplice to a unique, any earnings arising on such gifted property is required to be clubbed with the earnings of the accomplice transferring such asset. The clubbing provisions will proceed to make use of till the marriage subsists even when the transferred asset is reworked into totally different asset. The clubbing provisions will apply on earnings from the asset so transferred nonetheless on the earnings which arises on earnings so clubbed and extra invested.
So capital constructive features on sale of every the plots is likely to be taxed in your palms. One can avail tax exemption on sale of a plot if held for higher than 24 months each by investing the sale proceeds in a residential residence beneath Section 54F or by investing the capital constructive features in capital constructive features bonds beneath Section 54EC. Since you already private two flats in your establish you are not eligible to avail tax exemption beneath Section 54F.
However, you presumably can nonetheless declare exemption beneath Section 54EC by investing in capital constructive features bonds of Rural Electrification Corporation (REC), National Highway authority of India (NHAI), Power Finance Corporation (PFC) or Indian Railway Finance Corporation. Your listed worth of every the plots includes spherical Rs. 18.91 Lacs and the listed long term capital constructive features come to Rs. 56.09 lakhs. Since one could make investments most Rs. 50 lakhs in a yr and in respect of long term capital constructive features of a yr, you may should pay tax at 20% on the steadiness long term capital constructive features of Rs. 6.09 lakhs. The funding in bonds have to be made inside six months from the date of sale of the capital asset.
(Balwant Jain is a tax and funding skilled and might be reached on [email protected] and @jainbalwant on his twitter cope with)
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