Sale of House to cover Medical Expenses

Hi,

Hope you are doing well !!

As the date of acquisition of property falls prior to 1 April 2001, she has a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as her cost. 

So, firstly she needs to get the valuation report of property as on 01.04.2001.

To calculate the long-term capital gains tax payable, the following formula is to be used:

Long-term capital gain = full value of consideration received or accruing – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where:

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.

Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement.

Exemption from long term capital gains

She can claim an exemption from LTCG, under section 54 of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.

Alternatively and/or additionally, she can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.

-Without insurance cover, no other way to cover her hospital bills and post operation expenses.

However, we may assist you in tax implications on property sales.

You can sale this property but since she is in ICU how would someone else sell this property.

The capital gain on sale of property would depend on its indexed cost and that would depend on its valuation for 2001-02, so first get the valuation report from the government approved valuer for such land for 2001-02.

You can take a loan and later when she recovers you can sell the land and repay the loan.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Hello,

LTCG Long Term Capital Gain would be applicable to the sale of the house property.

You need to take a valuation report from a certified engineer for value of the property as on 1st April 2001, which will be your cost of acquisition, which will be indexed till the year 2019-20. Any improvement cost if incurred will be allowed as a deduction with indexation benefits.

The net figure of sale consideration and indexed costs will be the LTCG taxable at 20%.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

For exemption from tax on such LTCG, you can invest the capital gain amount in either another house property u/s. 54 or in specified bonds u/s. 54EC. The rest of the sale consideration can be utilized for their medical costs.

Hi

The sale of house property shall be liable to capital gain taxes. For the purpose of cost of acquisition of the property, FMV as on 1.4.01 needs to be known. That could be obtained from a registered valuer.

The remaining amount of consideration after payment of taxes can be used for the treatment.

If there are no other income sources available, even a house mortgage loan shall not be useful.

The house can be sold and consideration so received can be used for her treatment after payment of due taxes.

We may assist you with the tax computations and filings.

Dear Sir,

Here is my reply to your query:

In case you will sell the house property for 40 lacks then you have to pay the capital gain tax accordingly:

Sale Proceeds - 40,00,000

Less: Indexed Cost of Acquisition:  5,78,000

(2,00,000/100*289)

Capital Gain - 34,22,000

You have to capital gain tax @ 20% on 34,22,000.

In case you will spend all the money in her medical treatment, in that case also you have to pay the capital gain as mentioned above.

To reduce the capital gain tax you can also take the indexed benefits of some the improvements that were done in the house property.

Thanks and Regards 

Divya Chugh