TAX TALK-12.12.2011-THE HITAVADA
TAX TALK-12.12.2011-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“TRANSFER OF FLAT BEFORE SALE DEED: WHETHER CAPITAL GAIN OR BUSINESS INCOME?”
Query 1]
Till now, I used to deposit annually Rs. 40,000/- in my & Rs. 15,000/- each in the two PPF accounts of my minor children. Now, I wish to deposit Rs. 1 Lacs each in all the three PPF accounts. Is it permissible? What will be the tax implication of the principal and interest in the accounts of the minors? Your opinion will be highly appreciated. [Parantap Chandurkar-parantap2010@gmail.com]
Opinion:
There is a limit on subscription in the PPF Account. Any individual may, on his own behalf or on behalf of a minor of whom he is the guardian, subscribe to the Public Provident Fund any amount not less than Rs. 500/- and not more than Rs. 1,00,000/- in a year.
(The limit of deposit in the PPF A/c has been increased from Rs. 70,000/- to Rs. 1,00,000/- w.e.f 01.12.2011 vide Notification F.No. 1/9/2011-NS-II, dated 25-11-2011)
Query 2]
Sir, If am planning to sell my house property for Rs. 81 Lacs. At the time of executing the agreement to sale (registered agreement to sale), I will be getting certain amount & I will be receiving the final payment at the time of sale deed. I am planning to spread the transactions in two financial year i.e., agreement to sale in one financial year wherein I will be receiving part amount and sale deed in the next financial year wherein I will be receiving the balance amount. My query is whether I can invest Rs. 50 Lacs in the Capital Gain exemption bonds in both years, outer time limit being 6 months from the final sale? [******06@rediffmail.com]
Opinion:
1. It’s true that an assessee can invest maximum amount of Rs. 50 Lacs in a financial year in specified bonds (NHAI/REC) for claiming an exemption u/s 54EC.
2. However, for claiming an exemption from Long Term Capital Gain u/s 54EC, an assessee is required to invest the amount of LTCG in NHAI/REC Bonds within a period of 6 months after the date of transfer. The date of transfer is relevant for the purpose of section 54EC & not the date of agreement to sale or the date of receipt of payment etc. Merely depositing the amount in the 54EC bonds received at the time of agreement to sale may not enable an assessee to claim an exemption from LTCG U/s 54EC.
3. At the most, you can transfer the house in such a way that the subsequent period of 6 months falls in two financial years (i.e., in between October to March). It may enable you to invest the amount in the way you want to.
Query 3]
1. I am presently in the 10% tax bracket. Apart from my regular income, I also have income by way interest from bank FDR.
2. If I transfer Rs. 5 Lacs to my son's account & he puts the fund in FD with bank that earns interest for him which remains lower than taxable limits, would this be acceptable way of reducing tax?
3. My son is a major (above 21 yrs) and has PAN also.
4. Would any paper record of some kind be necessary other than Bank statements showing the transfer from one a/c to the other? [jrwitthal@gmail.com]
Opinion:
1. If you transfer the fund by way of GIFT from your account to your son’s A/c. the resultant income would be treated as his income and would be assessable in his hands only. It would a valid tax planning tool.
2. Apart from transferring the fund from your account to his account, you may further declare the gift by making a Gift deed. The Gift deed, for the purpose of Income Tax Act, may be done even on a plain paper.
Query 4]
1. Mr. A has entered into an agreement for purchase of House property with the builder on 10.11.2009 for Rs. 20.00 Lacs. Till date, the house has not been completed & now Mr. A is no more interested in keeping the property with him due to dispute with builder, and hence he has decided to sell it to another person.
2. The figures are :Total Cost of Property cost Rs. 20,00,000/-Payments till date Rs. 16,00,000/-Balance Rs. 4,00,000/-
3. The agreement to sale with builder was duly registered and appropriate stamp duty has been paid around Rs. 1,00,000/- (Dec 2009)
4. Mr. A is selling the property for Rs. 25,00,000/-
5. Now whether his income will be assessable as capital gains or regular business income? Mr. A is a businessman (Trader) & this is first house, he was purchasing.
6. Can Mr. A deposit this amount in 54EC Bonds to claim exemption?Please advice. [*****md@rediffmail.com]
Opinion:
1. Capital assets include the “RIGHTS” in the property also.
2. Mr. A is not engaged in the business of land trading /builder-ship / layout etc. As a result, the income would be taxable as capital gain income.
3. No exemption u/s 54EC shall be available as the capital asset (Rights in the property) is a short term capital assets. 54EC is available against LTCG only.
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“TRANSFER OF FLAT BEFORE SALE DEED: WHETHER CAPITAL GAIN OR BUSINESS INCOME?”
Query 1]
Till now, I used to deposit annually Rs. 40,000/- in my & Rs. 15,000/- each in the two PPF accounts of my minor children. Now, I wish to deposit Rs. 1 Lacs each in all the three PPF accounts. Is it permissible? What will be the tax implication of the principal and interest in the accounts of the minors? Your opinion will be highly appreciated. [Parantap Chandurkar-parantap2010@gmail.com]
Opinion:
There is a limit on subscription in the PPF Account. Any individual may, on his own behalf or on behalf of a minor of whom he is the guardian, subscribe to the Public Provident Fund any amount not less than Rs. 500/- and not more than Rs. 1,00,000/- in a year.
(The limit of deposit in the PPF A/c has been increased from Rs. 70,000/- to Rs. 1,00,000/- w.e.f 01.12.2011 vide Notification F.No. 1/9/2011-NS-II, dated 25-11-2011)
Query 2]
Sir, If am planning to sell my house property for Rs. 81 Lacs. At the time of executing the agreement to sale (registered agreement to sale), I will be getting certain amount & I will be receiving the final payment at the time of sale deed. I am planning to spread the transactions in two financial year i.e., agreement to sale in one financial year wherein I will be receiving part amount and sale deed in the next financial year wherein I will be receiving the balance amount. My query is whether I can invest Rs. 50 Lacs in the Capital Gain exemption bonds in both years, outer time limit being 6 months from the final sale? [******06@rediffmail.com]
Opinion:
1. It’s true that an assessee can invest maximum amount of Rs. 50 Lacs in a financial year in specified bonds (NHAI/REC) for claiming an exemption u/s 54EC.
2. However, for claiming an exemption from Long Term Capital Gain u/s 54EC, an assessee is required to invest the amount of LTCG in NHAI/REC Bonds within a period of 6 months after the date of transfer. The date of transfer is relevant for the purpose of section 54EC & not the date of agreement to sale or the date of receipt of payment etc. Merely depositing the amount in the 54EC bonds received at the time of agreement to sale may not enable an assessee to claim an exemption from LTCG U/s 54EC.
3. At the most, you can transfer the house in such a way that the subsequent period of 6 months falls in two financial years (i.e., in between October to March). It may enable you to invest the amount in the way you want to.
Query 3]
1. I am presently in the 10% tax bracket. Apart from my regular income, I also have income by way interest from bank FDR.
2. If I transfer Rs. 5 Lacs to my son's account & he puts the fund in FD with bank that earns interest for him which remains lower than taxable limits, would this be acceptable way of reducing tax?
3. My son is a major (above 21 yrs) and has PAN also.
4. Would any paper record of some kind be necessary other than Bank statements showing the transfer from one a/c to the other? [jrwitthal@gmail.com]
Opinion:
1. If you transfer the fund by way of GIFT from your account to your son’s A/c. the resultant income would be treated as his income and would be assessable in his hands only. It would a valid tax planning tool.
2. Apart from transferring the fund from your account to his account, you may further declare the gift by making a Gift deed. The Gift deed, for the purpose of Income Tax Act, may be done even on a plain paper.
Query 4]
1. Mr. A has entered into an agreement for purchase of House property with the builder on 10.11.2009 for Rs. 20.00 Lacs. Till date, the house has not been completed & now Mr. A is no more interested in keeping the property with him due to dispute with builder, and hence he has decided to sell it to another person.
2. The figures are :Total Cost of Property cost Rs. 20,00,000/-Payments till date Rs. 16,00,000/-Balance Rs. 4,00,000/-
3. The agreement to sale with builder was duly registered and appropriate stamp duty has been paid around Rs. 1,00,000/- (Dec 2009)
4. Mr. A is selling the property for Rs. 25,00,000/-
5. Now whether his income will be assessable as capital gains or regular business income? Mr. A is a businessman (Trader) & this is first house, he was purchasing.
6. Can Mr. A deposit this amount in 54EC Bonds to claim exemption?Please advice. [*****md@rediffmail.com]
Opinion:
1. Capital assets include the “RIGHTS” in the property also.
2. Mr. A is not engaged in the business of land trading /builder-ship / layout etc. As a result, the income would be taxable as capital gain income.
3. No exemption u/s 54EC shall be available as the capital asset (Rights in the property) is a short term capital assets. 54EC is available against LTCG only.
You are realy doing a commendabe job by your expert advise and help to we middle class employees. My heart felt thanks and congratulation to you and The Hitwada newas paper.
ReplyDelete