Capital gain investment

Capital gain investment

Dear Sir/Madam,

My father purchased a house property in Raichur, Karnataka on 27/2/2002 for Rs 52190.

After my father's death the house property was inherited by me and my brother and joint e katha was done on 14/9/2021.

I and my brother jointly sold the house property on 18/10/2021 for Rs 6300000. The amount was divided into 2 halves and each half was transfered to my and brother's accounts separately by purchaser.

I have been filing tax return as an individual separately from my brother in the previous years.

I understand that investment in SEction 54 and 54EC are eligible for tax exemption.

At the time of selling the above property I have one more house in my name.

My questions are:

1) Can I as an individual claim tax exemption under section 54 or 54EC though the property was sold

jointly?

2) I and my wife have jointly purchased a site in november 2021 for rs 832950 from my account only. Can we use this for house construction for sec 54 and claim full tax benefit for above?

3) How much time will be given for house construction of house for sec54 and what is the time limit for
opening a capital gain a/c?

4) After completion of house construction and utilising the entire amount in capital gain account for
construction, is it mandatory to close the account ? If yes, is IT assessment officer approval required
and what are the documents he will ask?

5) How much I should invest in sec54 or sec 54EC to save 100% tax?

6) How much is the time for investment in sec 54EC from sale date?

7) Any other method of investment to save tax?

8) What are the risks for investment in SEC54EC bonds?

Thanks & regards

R.M.Nadagouda

Asked 2 years ago in Capital Gains Tax

1) You and your brother can claim the benefits of exemption u/s 54/54EC separately.

2) Yes you can

3) Within 3 years from the date of transfer of the asset. Capital gain A/c should be opened before filing the ITR for the year in which the asset is transferred.

4) Yes at the time of closure of account, approval of jusrisdictional AO is required. He will ask for the proof of investments claimed u/s 54.

5) Capital gain is Rs. 30.67 lacs each.

6) 17/04/2022

7) No

8) Lock in period is 5 years. No loan or advance can be taken against such bonds within 5 years otherwise exemption would be revoked.

For detailed discussion you may opt for phone consultation.

Vivek Kumar Arora

CA, Delhi

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Dear sir/madam,

1. The capital gain is 30.67 each. I have no other income in 2021-22 except PF withdrawal of around 6 lakhs. My pf account was opened in 1995. So how much should I invest in sec 54/54 EC after exempt income and exempt tax?

2. My brother's occupation is agriculture. Should he also invest in sec 54/54EC or is he exempt by his occupation being agriculture?

Thanks and regards,

R.M.NNadagouda

Asked 2 years ago

1. Maximum investment in 54EC bonds allowed is Rs. 50 lacs. Estimate the construction cost of residential house and invest balance in 54EC bonds.

2. No he is not exempt by way of agriculture occupation. To save tax, he should also invest in 54/54EC.

Vivek Kumar Arora

CA, Delhi

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Hi,

With respect to your first question

1) Yes you along with your brother can claim the benefits of exemption u/s 54/54EC.

2) Yes you can claim exemption u/s 54 for construction to the extent of your own contribution in that joint property.

3) For house construction, you can construct within 3 years from the date of transfer of the asset or you can transfer the amount to capital gain A/c scheme before filing the ITR for the year in which the asset is transferred.

4) Yes you need approval of the AO for the closure of account.

5) Capital Gain would be half of sale consideration - half of indexed cost. The cost would be cost to your father and indexation would be from the year in which he purchased the property.

6) It's 6 months from the date of sale i.e. 17/04/2022

7) You can claim certain costs as improvement costs and claim transfer fees as deduction.

8) The downside of bond is lock in period is 5 years. No loan or advance can be taken against such bonds within 5 years otherwise exemption would be revoked.

9. You can invest entire capital gains in bonds.

10. Your brother agricultural income will be exempt but it will be considered for the purpose of computing tax slabs. So if he has other income, he should also invest.

Prerna Peshori

CA, Pune

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