PURCHASE THE PROPERTY
I and my mother jointly owned a house in Nagpur. On 1st February, 2012 we sold this property for Rs. 40, 00,000/-. We both got Rs. 20,00,000/- each. My mother is a senior citizen aged about 78 years.
Sir, my question is to save Capital Gain from this deal:
- Is it necessary to purchase a property jointly or can we purchase property individually?
- What is the time limit to purchase a property?
- Can we keep the amount in Fixed Deposit till we purchase a new house.?
- We are not interested in depositing the amount in Capital Gain Bond.
Exemption is admissible even if the property is purchased individually:
It is not at all necessary to purchase a joint property to claim an exemption from LTCG. By purchasing two separate property individually also, one can have an exemption from LTCG.
Time limit to Purchase the Property:
Exemption u/s 54 (or u/s 54F, if the asset sold is not a residential house property) is available if the Assessee invests amount of LTCG for purchase of another residential house property
a] within One year before or two years after the date of transfer; or
b] constructs a residential house within a period of three years from the date of the transfer of the original house.
Scheme of Deposits:
a] Although under section 54/54F, the assessee is allowed 2 years to purchase or 3 years for construction of the house property, but the capital gain on transfer of the original assets is taxable in the previous year in which the transfer took place. The return of income of that previous year is to be filed before the specified date. Hence, the assessee will have to take a decision for the purchase/ construction of the house property before the date of furnishing of the return otherwise the capital gain would be taxable.
To avoid the above situation, the Income Tax Act has specified an alternative in the form of a Deposit under the Capital Gain Deposit Accounts Scheme-1988 (CGDAS).
The amount of the capital gain, which is not utilized by the assessee for purchase or constructions of the new house before the date of furnishing the return of income, should be deposited by him under the Capital Gain Accounts Scheme, before the DUE DATE of furnishing the return. After Deposits, the amount already utilized by the assessee for purchase/ constructions of the new house, along with the amount so deposited, shall be eligible for exemption under section 54/54F in the year in which LTCG has arisen.
b] The investment in the PLAIN FIXED DEPOSITS may not enable you to claim an exemption. Ensure to keep the amount in the CGDAS.
However, one can keep the amount in the plain fixed deposits after the sale of the property and can divert it in the CGDAS before the due date of filing the return of income.
It may be note that under CGDAS also, two types of accounts can be open as under:
a] Deposit Account-A – This is a saving account.
b] Deposit Account-B- This is a term deposit account.
- INVESTMENT IN CAPITAL GAIN BONDS:
Exemption can be claime either by investing in the bonds u/s 54EC or U/s 54 by investing in the house property. Assessees have the choice.
My father has had an investment of about Rs. 4 Lacs wherein he has nominated me as nominee. My father expire last month. Now I want to claim the death maturity. Is the amount so receive be add in my taxable income? If yes, then is there any investment or savings I can resort to for saving the taxes? [Arindam Lai firstname.lastname@example.org]
- The amount received by you as a nominee is not at all taxable.
- The income on the investment of Rs. 4 Lacs from the date of deposits to the date of death would be treated as income of your father only & not your income.
- You may be require to file the return of income of your father in a representative capacity if his income till the time of his death exceeds the basic exemption limit.
The amount of LTCG has been deposit in a public sector bank for 3 years under capital gain deposit account scheme. Will it be taxable after maturity period if the maturity amount is not invest /utilize for purchase of land/building etc? The Bank is deducting TDS from the annual accrual of interest on the above deposit. Please advise.
- In case the amount of LTCG invest in the CGDAS is not so utilize for purchase or construction of house property, it would be treat as income under the head “Capital Gain” of the previous year in which the period of 3 years from the date of LTCG expires and will be taxable as LTCG of that previous year.
- The assessee shall be eligible to withdraw the amount from CGDAS after getting approval of the Assessing Officer by submitting an application in Form G prescribed under the scheme.
- At the time of withdrawal, the amount deposited in the CGDAS would be taxable as LTCG and interest received under this account is taxable as “Income from Other Sources”
PURCHASE THE PROPERTY