“SENIOR CITIZEN : RELIEF FROM PAYMENT OF ADVANCE TAX”

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Query 1]

I had purchased a flat in 2006 in Pune for Rs. 18 Lacs. I am selling this flat now as I do not intend to retain the said flat. I am selling the flat for Rs. 44 Lacs. I had a Housing loan for this flat. I and my wife were Co-owners in property and also Co-borrowers in Loan. Currently my wife is Housewife. I would like to know:

  1. How much is the tax I will have to pay as capital gains?
  2. Can I split the tax payable between us?
3.      How much is the tax I will have to pay?

4.      What is the last date for the same?

5.      In case if tax payable is delayed, what are the implications for the same?  [viks_mahajan@yahoo.co.in]

Opinion:

  1. You will be selling the flat after a holding period of more than 36 months and so the resultant gain would be taxable as Long Term Capital Gain (LTCG). The amount of LTCG could not be worked out in absence of (a) The exact month of purchase (b) Year of Sale (c) Stamp Duty Valuation (d) Purchase/ Sale Expenses involved etc. It may however be noted that the LTCG is taxable @ 20% u/s 112 of the Income Tax Act-1961.
  2. It appears that you and your wife are co-owners in the house property & you have claimed the housing loan benefit (Deduction towards Interest & Principal) on proportionate basis. If it is so, the amount of LTCG could be split between you and your wife. Unless there is anything to prove anything otherwise, co-owners are presumed to have equal share in the ownership.
  3. As mentioned above, LTCG is taxable @ 20%. However, if other income of taxpayer is below the basic exemption limit then unutilized basic exemption limit (i.e., difference between the basic exemption limit & other income of the taxpayer) can be reduced from the amount of LTCG & the balance amount only would be taxable @ 20%.
  4. Income tax payment is required to be done before the filing of the income tax return. However, taxpayer is under an obligation to pay the same in the form of “Advance Tax” if estimated tax liability is Rs. 10,000/- or more during any particular year. Individual have to pay the advance tax in three installment as under:
    a] up to 15th September : 30% of the tax liability.
    b] up to 15th December        : 60% of the tax liability.
    c] up to 15th March              : 100% of the tax liability.
    [From the Financial Year 2012-13, Senior citizens (60 years or more) don’t have the liability to make the advance tax payment of tax if they don’t have any income under the head “Income from Business/Profession”. Senior citizens can make the payment of tax on their total income by way of Self Assessment Tax at the time of filing Income Tax Return. It may be noted that the due date of filing income tax return for senior citizens, not having business income, is July, 31st. ]
  5. In normal course, the delayed payments need to be compensated by Interest u/s 234A. B & C of the Income Tax Act-1961. However, readers are advised to adhere to the provision of Advance tax payment.

 

 

Query 2]

I would like to know whether income from interest on PPF Account, when the account is extended beyond 15 years without any subscription, is exempt or not? [shantukumarved@gmail.com]

Opinion:

The PPF interest would be exempt even if you continue the PPF account beyond 15 years & no subscription is done therein.

 

Query 3]

In Feb.2007, I had purchased Single Storied House @ Rs. 10.50 Lacs and taken Loan from Bank being Salaried Person of State Govt. Recently, on account of my elder Daughter Medical College Admission, I had sold the House@ Rs.33.00 Lacs. Please clarify how much tax liability arises on the Sale deed Amount? I have paid Donation of Rs.20.00 Lacs and Bank Liability of Rs. 5.00 Lacs or so. On what mode I have to reinvest to save Taxes and also to secure my future the remaining amount of Rs. 8.00 Lacs? Kindly Guide us in this regards. [Harekeshav Tiwari- tiwari_hare@rediffmail.com]

Opinion:

  1. The capital gain has to be worked out on the basis of actual sale price or stamp duty valuation whichever is higher. Assuming that
    a] stamp duty valuation of the flat you have sold is less than Rs. 33 Lacs &
    b] you have sold the flat in the FY 2013-14
    and further ignoring the purchase/sale expenses involved in the transaction, the Long Term Capital Gain (LTCG) would be Rs. 14,00,289/- (i.e., Rs. 33 Lacs less Rs. 10.50 Lacs * 939/519). It may be noted that Cost Inflation Index (CII) for the relevant FY 2006-07 & 2013-14 are “519” & “939” respectively.
  1. The repayment of housing loan of Rs. 5 Lacs & donation of Rs. 20 Lacs would not help you directly in reducing the amount of LTCG.
  2. Exemption from LTCG:
    In respect of Long Term Capital Gain arising from sale of House property, exemption can be conveniently claimed U/s 54EC or u/s 54, as under:
    a) U/s 54EC:
    To save LTCG tax u/s 54EC, one has to invest the amount of Long Term Capital Gain (LTCG) within a period of 6 months from the date of sale/transfer of assets in the specified bonds issued by REC/NHAI. Investment in RBI Bonds will not enable you to claim an exemption u/s 54EC. There is a maximum ceiling of Rs. 50 Lacs in a financial year for investment in 54EC Bonds. The interest from the bond is taxable as regular income only.
    b) U/s 54:
    Exemption u/s 54 is available if the assessee invests amount of LTCG for purchase of another residential house property within a prescribed time as under:
    i] For purchase:
    One year before or two years from the date of Transfer.
    ii] For Constructions:
    Three years from the date of Transfer.


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