However, look at the
conditions before invest..!.
by Ms. Parizad
Sirwalla, KPMG
For ancestral
property, the period of holding is reckoned from the date of purchase of the
property by the owner who actually acquired it otherwise than by inheritance or
/ gift. Since, the property was originally purchased by you,
the cumulative period of holding has exceeded 36 months (3 Years) from the date
of acquisition. Accordingly, the capital gains, if any, shall be taxed as
long-term capital gains (LTCG).
In case of
inheritance, the cost of acquisition shall be the cost for which the owner who
actually acquired the land otherwise than by inheritance or gift as increased
by the cost of improvement made subsequently.
Further, since the
property was acquired by you prior to 1 April 1981, you have the option of
taking the actual cost of acquisition or fair market value (FMV) of the
property as on 1 April 1981 in the absence of details of the actual cost of
acquisition as certified by a registered valuer.
The cost of purchase
shall be increased using the applicable cost inflation index (CII) notified by
the income-tax department with respect to the base year - inancial year
1981-82.
Further, the cost of
improvement, if any, made subsequent to the purchase of property shall be
increased using the CII of the Financial Year in which the cost of improvement,
if any, was made. You also need to consider the CII of the Financial Year of the sale of property.
You can avail an
exemption from LTCG tax by re-investing it in a new residential property, as
per section 54 of the Income-tax Act or in specified bonds as per section 54EC
of the Act.
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| Parizad Sirwalla, KPMG |
The investment of
LTCG in a new residential property has to be made within the specified time
frames - within 1 year prior to the sale date or 2 years from the sale date or / within 3 years
from the sale date for an under-construction property - subject to fulfilment
of other specified conditions under section 54 of the Act.
The quantum of
exemption under section 54 of the Act is restricted to the lower of the cost
price of the new property or LTCG resulting from the sale of the old property.
You could also invest
LTCG in bonds issued by the National Highways Authority of India or / Rural
Electric Corp. Ltd and claim an exemption. The investment should be made within
6 months from the sale of the old property subject to a cap of Rs.50 lakh per
financial year.
The investment in the
residential apartment or specified bonds has a lock in period of three years or
the exemption claimed shall be revoked.
About the author...!
Ms. Parizad Sirwalla is Partner (Income Tax),
KPMG
Contact:
Ms. Parizad Sirwalla, Partner, KPMG, Mumbai.
Email: psirwalla@kpmg.com , Phone: +91 22 3090
2010
KPMG - Mumbai Office
KPMG, Lodha Excelus
Apollo Mills Compound, NM Joshi Marg, Mahalaxmi, Mumbai - 400 011
Phone: +91 22 3989 6000, Fax: +91 22 3090 2210
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