How revenue tax rule applies on residential home proceeds — defined

I’m salaried individual. I’ve offered a residential property for 1.10 Crore within the month of March 2023 which was bought in June 2002 for 20 lakh. I don’t intend to purchase one other property instantly. Can I nonetheless reduce my tax legal responsibility on the revenue from the sale?.

Reply: Earnings from sale of any capital asset together with a residential home is taxed as capital good points after deducting the price of acquisition from the web sale proceeds. In case the home is offered after 24 months, you’re allowed take listed value as your value of acquisition for computing long run capital good points. In case the property is offered inside 24 months, the distinction is taxed as quick time period capital good points on the slab price relevant to you.

Listed value of an asset is computed by multiplying the price of acquisition by Price Inflation Index (CII) of the 12 months of sale and dividing the identical by CII of the 12 months of buy. In your case, the price of acquisition is 20 lakh and the listed value could be round 63.05 lakh, taking 105 because the CII for 12 months of buy and 331 CII for 12 months of sale. The listed long run capital good points is 46.95 lakh (Rs. 110 lakhs – Rs. 63.05 lakhs). The identical could be taxed @ 20.80% (20% with indexation + cess 4%).

Since you don’t want to purchase a residential home instantly, it can save you tax on this long run capital good points by investing Rs. 46.95 lakhs in capital good points bonds of any of the desired monetary establishments like IRFC (Indian Railway Finance Company), PFC (Energy Finance Company), NHAI (Nationwide Freeway Authority of India) and REC Ltd. inside six months from date of sale of the property the place one can make investments most of fifty lakhs in a monetary 12 months. The bonds have lock in of 5 years. The cash obtained on maturity of those bonds is tax-free. These bonds presently supply 5.25% curiosity which is taxable.

For those who change your thoughts inside six months and resolve to purchase property sooner or later, you possibly can deposit the quantity of listed capital achieve in a checking account underneath the Capital Positive aspects Account Scheme (CGAS) earlier than due date of submitting of the ITR which is thirty first July 2024 for salaried individuals. This cash will be utilized for getting a prepared to maneuver in residential home inside two years from date of sale of the property or inside three years for self-constructing a home or reserving an underneath development residential home. There could be no tax on the capital good points if this cash is used to utilized as above else it should develop into taxable when the interval of three 12 months expires.

(Balwant Jain is a tax and funding knowledgeable and will be reached on [email protected] and @jainbalwant on his twitter deal with)

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