TAX TALK-05.03.2012-THE HITAVADA

TAX TALK-05.03.2012-THE HITAVADA

TAX TALK

BY CA. NARESH JAKHOTIA (Chartered Accountant)

SALE OF AGRICULUTURAL LAND AFTER CONVERTING INTO NON AGRICULTURAL”

Query 1]

I am making this query after reading your article in The Hitavada, Money, dated 30/1/12 under the title "Capital gain deposit A/c Scheme".

We are having land outside NMC Limits, which has been converted to Non-agricultural use and the layout has been sanctioned.
The said land was owned by my grandfather, then passed on to my father by way of gift deed and now is jointly owned by my (a) Father (b) Mother (c) Myself & (d) My brother, in equal proportion.

Land was acquired by grandfather before 01/04/1981. Now we intend to sell some plot to a Limited co. for a consideration of Rs. 8.50 Cr.
From our previous sale of some other property, we are having Capital Gain Loss to above persons as under:
(a) Rs. 98,02,356/-

(c) Rs. 55,43,693/-

(d ) Rs. 36,87,586/-
Kindly let me know the amount of Capital Gain and what are the ways of saving the CG tax. [Vishal-
mlsnagpur@rediffmail.com]

Opinion:

  1. The property is an ancestral property and the fair market value of the property as on 01.04.1981 could be taken as the cost of acquisition.
  2. The cost of acquisition taken above would be indexed so as to arrive at the indexed cost of acquisition of the property. (The Cost Inflation Index for the F.Y. 2011-12 is “785”. If the property is sold in F.Y. 2011-12, the cost of acquisition considered om(1) above, would be multiplied by 7.85 so as to arrive at the indexed cost of acquisition.)
  3. The difference between the indexed cost of acquisition computed above & the sale price of Rs. 8.50 Cr. (or the value adopted by the Registrar for levy of stamp duty,if it is higher) would be the amount of long term capital gain. The LTCG so computed above would be divided in equal proportion in the hands of four persons as mentioned in the query. LTCG is taxable @ 20% u/s 112 of the Income Tax Act-1961. In the absence of all the relevant details, the amount of LTCG could not be worked out.
  4. As far as the loss in the hands of (a), (c) & (d) is concerned, the same can be set off against the current year LTCG provided that the loss is brought forward from the earlier years as per the provision of the Income Tax Act-1961 i.e.,
    a] The original return in which loss was incurred was filed before the due date of filing with the benefit of carry forward of the loss.
    b] The benefit of carry forward & set off of loss is available only for 8 assessment year succeeding the assessment year in which the loss was incurred.
  5. One can save the Long Term Capital Gain tax arising from sale of plot by following mode:
    a) U/s 54EC:
    To save LTCG tax u/s 54EC, Assessee is required to invest the amount of Long Term Capital Gain (LTCG) within a period of 6 months from the date of sale/transfer of assets in the specified bonds issued by REC/NHAI. However, there is a maximum cap of Rs. 50 Lacs in a financial year for investment in the NHAI/REC Bonds.
    b) U/s 54F:
    For exemption u/s 54F, Assessee (Individual or HUF) has to invest the amount of net sale consideration for purchase of a residential house property within a prescribed period.
  6. For the benefit of the masses, we are elaborating the provision of section 54F as under:

a. The exemption is available only to an individual or a Hindu Undivided Family.

  1. The capital gain should arise from the transfer of any long-term capital asset other than residential house property. (If capital gain arises from transfer of a residential house property, an exemption can be claimed u/s 54.)
  2. The transferor must, within a period of one year before or two years after the date on which the transfer took place purchase, or within a period of three years after that date construct, a residential house.
  3. The transferor does not own more than one house property, other than the new asset, on the date of transfer of the original asset.
  4. The Assessee shall not purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset or construct any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset.
  5. If all above conditions are satisfied, transferor can claim entire LTCG as exempt provided entire amount of sale consideration is invested for new residential house property. If entire sale consideration is not invested then Exempt LTCG shall be Cost of New House * Capital Gain/ Net Sale consideration.
  6. U/s 54F, it’s the investment of actual sale consideration that determines the claim of exemption.

Query 2]

High Value Transactions are to be given at tax returns. I have a query as regards mentioning of MF units purchased. The purchase transactions above Rs. two Lacs are to be included. Please clarify whether the limit applies to units of one MF scheme/plan or All MF schemes units under same Mutual Funds or All schemes units under different Mutual Funds scheme, Or When switch option is exercised no payment is made but technically it is treated as sale & buy action, whether such purchase is to be included in high value transaction and shown in Tax Return? [dhanyakumar1936@gmail.com]

Opinion:

“Schedule-AIR” requiring the disclosure of investment of Rs. 2 Lacs or more in mutual fund has been omitted from all the Income Tax Return Forms issued for the A.Y. 2011-12.

In the earlier year, the aggregate investment of Rs. 2 Lacs or more in all the mutual funds taken together was required to be reported by the investor Assessee.

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