“RESIDENT IN LUCKNOW, PROPERTY SOLD IN NAGPUR, WHERE TO PAY INCOME TAX?”

TAX TALK-28.05.2012-THE HITAVADA

TAX TALK

BY CA. NARESH JAKHOTIA (Chartered Accountant)

“RESIDENT IN LUCKNOW, PROPERTY SOLD IN NAGPUR, WHERE TO PAY INCOME TAX?”

Query 1]

Kindly let me know whether interest earned from Post Office Monthly Income scheme (MIS) is taxable or not? If not, under which section? Also let me know what does the section 80L deal with? [bpmajumdar2006@rediffmail.com]

Opinion:

Interest on post office Monthly Income Scheme (MIS) is taxable. There is no provision in the Income Tax Act to exempt the interest on post office MIS. Section 80L is no more in vogue. Similar to erstwhile section 80L, the Finance Act 2012 has inserted a new section 80TTA in the Income Tax Act – 1961 which will provide deduction up to Rs. 10,000/- to an Individual/ HUF towards Interest on saving bank A/c maintained with a bank / society / post office. The deduction admissible shall be interest received or Rs. 10,000/- whichever is lower. (It may be noted that saving bank account interest  maintained with a post office is exempt from income tax u/s 10(15)(i) & the same is not to be considered in claiming deduction of Rs. 10,000/- u/s 80TTA)

Query 2]

My Question is regarding “Capital Gains” whether taxable? If so, please furnish the procedure & also how the Tax Code released in the context of following:

1.      My Close relative is a permanent resident of Luknow abinitio, in the State Of Uttar Pradesh.

2.      She purchased two flats at Nagpur in the same building complex from the builder in the year 1986 valued at above Rs. 5,00,000/- (Rupees Five Lacs only).

3.      Now, she sold both the flats for Rs. 70,00,000/- (Rupees Seventy Lacs only) excluding stamp duty in the month of April-2012 by Demand Draft drawn on Bank at Luknow. She carried the Bank DD to Luknow immediately on execution and registration of Sale deed.

4.      Since long, she owns her House Property at Luknow.

Now, at this Juncture, is she liable for tax payment on the Capital Gains either at Nagpur or Luknow being the fact that Purchased and resale of the said property is held at Nagpur. And besides, what shall be the Amount of tax payable after deduction of purchased value Rs. 5,00,000/-.

Please Apprise. [Chandrakant Taide, Ashish Apartment, Plot No. 371, Gandhinagar, Nagpur – 440010]

Opinion:

1.      Assessee can pay the capital gain tax at a place where he normally files his/her income tax return. The PAN is valid throughout India & the place of transaction is not relevant for paying the income tax.

2.      Thought the profit on sale of both the flat is Rs. 65 Lacs, the tax is payable not on Rs. 65 Lacs but could be on a lesser amount of profit. The tax is payable on the amount of Long Term Capital Gain.

3. Computing Long Term Capital Gain:
   Long term need to be calculated after deducting from the full value consideration (i.e., Rs. 70 Lacs or the Stamp Duty Valuation if it is higher than Rs. 70 Lacs, in the given case) the following:
   (a) Indexed cost of Acquisition and
   (b) Indexed cost of Improvement.
   Further deduction is also available towards the expenses incurred WHOLLY & EXCLUSIVELY in connection with the transfer.
4. The cost inflation index for the FY 1985-86 is “133” & for the FY 1986-87 is “140”. The cost inflation index for the FY 2012-13 has not yet been notified.
5. Long term capital gain is taxable @ 20% u/s 112 of the Income Tax Act-1961.

Query 3]

My father is retired Govt. employee receiving pension of Rs. 7,000/- pm. He is planning to sale property consisting of land and building for Rs. 26 Lacs. He had purchased the land approx 20 years ago for Rs. 26,000/- and constructed a house for Rs.10 Lacs in 2003-04. Kindly tell us

1.      Which type of taxes and applicable rates he would be liable to pay
on this sale?

2.      If he transfer a portion of the amount received in this sale to his
children, what are tax implications on him and the receiver as well?
Kindly guide. [21jagrati.malviya@gmail.com]

Opinion:

1.      Your father will be liable to pay the Income Tax (Long Term Capital Gain Tax) @ 20% on the amount of capital gain arising sale of land & building. You can refer Query No. 2 above wherein the mode of computing long term capital gain is covered at length. If taxable income of your father is below the basic exemption limit, the unused basic exemption limit can further be used to reduce the amount of taxable long term capital gain.

2.      The transaction of gift by father to the children (Major) is tax neutral. Neither father nor children are liable to pay any income tax on the amount gifted.