I booked a residential apartment in December 2004 and paid Rs 33 lakh (Rs 18 lakh cash + 16 lakh home finance), which is now priced at Rs 73 lakh. The apartment is now ready for possession. But instead of taking possession I want to sell it.What happens if I sell it out now? Does it attract capital gains? How much? How do I plan the savings? How long do I have to invest in bonds? Or how can I save the tax?
?Subhransu Kanti De
If you sell the property before taking possession, you are selling a right to own a flat. The cost of acquisition of this right is the total cost of the flat you have paid (including penal interest) and the date of its acquisition is the date on which you made the very 1st payment, whether in installments or as a lump sum.
In your case, since the period of 3 years has elapsed, you have earned long-term capital gains after indexations, which are chargeable to tax @ 20.6%.
After the house is ready and you have taken possession, it becomes a different species. The clock for long-term or short-term starts once again from the date of your taking possession. If you sell the flat after taking possession, you will have earned short-term capital gains, which are chargeable to tax at the normal rates applicable to your total income, inclusive of the short-term gains.
The tax on all long-term capital gains, which are chargeable to tax, can be saved by investing within 6 months the amount of capital gains in infrastructure-related bonds of NHAI or REC u/s 54EC. The lock-in period is 3 years. The current interest rate is around 5.5% and this is fully taxable. The ceiling on this investment is Rs 50 lakh per financial year.
I have invested Rs 1 lakh in my wife’s name in a recently offered single premium insurance plan. However, after reading more about the same, I feel I have been taken for ride by the hidden rules. Is it possible to cancel my policy or deposit at this stage?
?Ashok
For any life insurance, the entry is easy but exit entails a heavy loss. The loss is so heavy that it becomes necessary to stay put. Fortunately, most insurance plans have a free look period that ranges from 15 days to a month. The policy can be cancelled or reversed if you were to change your mind during this free look period. Check this clause in the case of the particular plan that you have invested in.
I have a query regarding interest earned on bank deposits. Banks deduct TDS in various ways on such deposits – some quarterly, others at the end of the financial year, or others on maturity. My question is can the depositor also choose to offer such income for tax either at the end of each financial year (in case of multi-year deposits) or at maturity (if the interest is paid to him on a cumulative basis)?
?Sonal Shah
TDS on interest is deducted by banks each year if the same is above Rs 10,000. The same is true even in the case of cumulative deposits where the interest is accrued and payable at the end of the term. As per the tax law, interest earned, whether received or accrued has to be offered for tax every year as and when the investor earns it.
Can I claim deduction on property stamp duty and registration paid? Will this be under 80C?
?Suresh Kumar
Yes, expenses on stamp duty and registration are deductible under Sec 80C.
Such a house is required to be held for at least 5 years from the end of the financial year during which the possession was taken.
I am a retired executive from a central PSU since 31.01.2003 and aged 64 years. Whatever amount I received as retirement benefits, I spent on the renovation of my house and in arranging the marriages of my sons and daughter. I received a monthly pension of Rs 926 under EPS1995. Except this pension of Rs 926, I have no other source of income like interest on FD or MIS etc.
I receive an amount of Rs 80,000 yearly from my son who is employed in a private company and stays in Chandigarh. He files income tax return regularly.
I meet my day-to-day expenses from this amount during the whole year, since I stay at Ambala at my residence. Nothing is saved out of the above amount. My son has not claimed any deduction/relate in the past on this amount so far while compiling his income tax return.
Now kindly advise me, as to whether this amount of Rs 80,000 can be considered as a gift to me from my son and in return can be claimed as rebate/deduction of this amount from the gross total income for calculation of his income tax liability or this amount of Rs 80,000 is subject to the ceiling of Rs 1 lakh saving?
?G.S.Saini
The amount of Rs 80,000 can be considered as household expenses of your son or as a gift to you, as he pleases. In either case, there are no tax implications. Gift to father does not entitle your son of any deductions or rebate for tax purposes.
The authors may be contacted at wonderlandconsultants@yahoo.com