Capital Gains Tax on Property
My mother, aged 76, a bonafide cancer patient and currently bed ridden, has sold a residential property.
In what time frame, another ready built property can be purchased, so as to avoid taxes?
Further, in case of her unfortunate demise, without investing in another property, what will be the consequences? Can my Father then make this investment, within this time frame?
What are other options? more
What happens to NRI card Holder??. When & How can he/she sell the house if he/she wants to take all the money into foriegn currency. Is it possible?? or He/She needs to pay CGT???. Please answer. more
Income tax rules for NRIs are similar to that for Residents. She will need to pay tax @20% Or purchase property Or invest in specified capital gain bonds. NRIs are not exempted from payment of tax on capital gains.. more
I thought One can deposit all the amout from Sale of House into number of specified ,Taxfree Bonds or into Capital Gains Tax Exemption Trust Account in the Nationalised Banks for 3 years & then you can withdraw without any Income Tax......Is that right????? .Please answer. more
The ready built house is required to be purchased within two years of Sale of the property or deposit the amount of capital gain in the capital gain bonds of companies notified by the government in this regard.. The legal heirs can neither purchase new property nor capital gain bonds to save payment of income tax as there is no such express provision in the Income Tax Act. So it is very important to Consult an experienced Tax consultant in this regard. more
Sorry to hear about your mother's illness. May God give her strength to recover. Now, coming to the legal issue, attention is invited to section 54 of Income tax Act which provides that if capital gains arising from transfer of residential house is used to purchased another residential building either one year before or two years after date of sale, or constructed within three years of sale, then the capital gains arising is exempt to the extent of amount of capital gains do used. Pending utilisation, you have to deposit the amount of capital gains in a capital gains account with a bank before the due date of filing return . You can withdraw money from this account and appropriate it towards new property within time permitted in this behalf. In the unfortunate event of demise of your mother prior to acquisition of house , in my opinion, the legal heir/ successor/ representative can buy the house and claim deduction because section 259 of the Act provides that where a person dies the legal representative shall be liable to pay tax in the same manner and extent as the deceased person. The necessary implication of this is that even the LR is subject to the same rigours as the deceased then he ought to get all the exemptions as would be available to the deceased . Another option to avoid tax is investing in binds under section 54EC. more
Thanks a lot for the information, dexterously explained. more
a. The law is that if you want to reinvest in the entire capital gain in a residential property, you have to do so in ready built house either before 1 year or after 2 yours of sale of old house or if you want to construct a new house, you have to do it within 3 years from the sale of old property.
But if you do not invest in above, before the due date of filing of your IT return, you have to deposit the entire amount in a Capital gain Deposit scheme in any Nationalized Bank without fail.
You had another option of investing in specified bonds upto Rs.50.00 lakhs out of your capital gain and the rest you can invest in property or pay tax.
b. In case of demise of your mother, if entire capital gain amount is deposited in Capital gain scheme by her before death can be withdrawn by her legal heirs without payment of any Tax as the liability for non investment of proceeds in a residential house ceases on her death more
Thanks for the information. more