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I have a query regarding Capital Gain. My client is NRI. He had purchased a Plot in Nagpur City in the year 1989 for Rs. 10,000/-. In the year 2014, September he has also purchased a residential house at USA for a consideration in Indian currency of rupees 1,00,00,000/-. At the same time in the year 2014, December he has sold the plot which he bought in the year 1989 for total consideration Rs. 60,00,000/-. My Question is that whether he is applicable to pay Capital Gain or Not? If not, why? If yes, why? What is the amount of capital gain? Kindly advise me. [email@example.com]
- Taxability in India:
Any income accruing or arising in India or any income from transfer of any assets located in India, is taxable in India.
- Computing Long Term Capital Gain:
NRI are also eligible for indexation benefit while computing Long Term Capital Gain (LTCG). Cost Inflation Index (CII) for the relevant financial years 1989-90 & 2014-15 are “172” & “1024” respectively. If the plot is purchased in the FY 1989-90 (i.e., on or after 01.04.1989), Indexed cost of acquisition would be Rs. 59,534/- (i.e., Rs. 10,000/- * 1024/172). LTCG would be Rs. 59,40,465/-.It may be noted that
a] stamp duty, registration expense etc paid for purchase of the plot could form the part of purchase price
b] brokerage/other expenses paid for sale of plot could also be reduced from the sale price while computing LTCG.
c] If the government value of the property adopted for levy of stamp duty exceeds Rs. 60 Lacs, then LTCG would be required to be calculated by taking such higher value.
d] Long term Capital Gains arising on sale of property are taxable in the hands of seller @ 20% plus 3% education cess thereon (& surcharge if applicable).
- Tax Exemption:
An assessee (whether resident or non-resident) can save LTCG arising from transfer of plot by claiming an exemption u/s 54F or U/s 54EC, as under:
i) Exemption Under Section 54F:
For exemption u/s 54F, subject to various other terms / stipulations, NRI have to invests the amount of net sale consideration for purchase of a residential house property in India within a prescribed period.
The important question- whether LTCG exemption is available if NRI invests the amount for purchase of a residential house property outside India? The issue has now been settled by the Finance Act-2014 which have specifically provided for exemption only for purchase of a residential house property situated within India. So, no exemption is available for purchase of house property outside India.
ii] Exemption Under Section 54EC:
To save tax u/s 54EC, NRI have to invest the amount of LTCG in the Specified bonds REC/ NHAI within a period of 6 months from the date of transfer. However, there is a maximum investment ceiling of Rs. 50 Lacs for investment in 54EC Bonds. Effectively, LTCG up to Rs. 50 Lacs only can be saved u/s 54EC.
One of my colleagues working in Government institution has the following grievance in getting tax refund from Income Tax authorities. The monthly TDS from his pay & allowances were wrongly remitted in an unknown person’s PAN No. by the D.D.O. of the office for the assessment years from 2009-10 to 2012-13. It is also noticed that the name of the employee is mentioned but Pan No. of some unknown person is shown therein. There was no match of name and PAN no. on the returns of the office.
It is quite acceptable opinion that name and PAN No. are to be match while taking into account of the transaction by I.T. authorities. But their contention is that they need not see and get match the name and PAN No. of the person while making process of the transaction at their level. As a result, a notice of liability of all those TDS remittances of him made on wrong PAN No. as unpaid was issue to him and also the refund determine during process of assessment year 2014-15 has been adjuste against the outstanding demands. Hence, it is requested to kindly advise us for needful action from his side so that his dues to be adjusted and refund will be released. [V.Ravi Kanthfirstname.lastname@example.org]
- There are numerous taxpayers who are facing the problem like this. Either the demand is raised or refund is adjusted due to mismatch in the amount of TDS. Obviously, 26AS of the deductee is not reflecting the amount of tax deducted at source due to error by the payer in filing their TDS return.
- To provide a relief to taxpayer in such cases, CBDT has issued Instruction No. 5/2013 [F.NO.275/03/2013-IT(B)], dated: July 08 2013 for giving credit of TDS in case of mismatch. The relevant para 2 & 3 of the instructions are reproduced herewith for the benefit of all the taxpayers:
“ 2. The Hon’ble Delhi High Court vide its judgment in the case ‘Court On its Own Motion v. UOI and Ors. (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14-3-2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assessee furnishing before the Assessing Officer, TDS certificate issued by the deductor.
In view of the order of the Hon’ble Delhi High Court (reference: para 50 of the order); it has been decide by the Board that. When an assessee approaches the Assessing Officer with requisite details. And particulars in the form of TDS certificate as an evidence against any mismatch amount. The said Assessing Officer will verify whether or not the deductor has made payment of the TDS. In the Government Account and if the payment has make, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS with the relevant AO (TDS). The AO may also, if deemed necessary. Issue a notice to the deductor to compel him to file correction statement as per the procedure laid down.”
- In the specific issue raised in the query, a taxpayer may write to his assessing officer with all the facts & figures and giving reference of the instructions mentioned above. The demand in such cases would be drop and the legitimate refund would be grant to the taxpayer…..