1. I purchased a flat (A) in August 2004 (full down payment and allotment letter received in Aug 2004), for which construction was completed in March 2007 and the builder handed over possession to me in April 2007.
2. I purchased another flat (B) in October 2007 (again full down payment and allotment letter received), for which construction has already started and I will get possession in April 2010.
3. If I sell the first flat (A) today, will the gains be ST or LT? Also, will the gains be taxable, since the flat (B) costs definitely much more than the profit that I will make through selling flat (A)?
?Surjeet Datta
The date of acquisition of your flat falls in April 2007 and not in August 2004. In August 2004, you have earned a right to own a flat when you entered into a contract with the builder. Had you sold the property before taking possession of the flat when if was ready for possession, you would have earned capital gains. The long-term or short-term nature of the sale of this ‘right to possess’ would depend upon whether the period of 3 years has elapsed from the date of the contract.
After the flat is ready, it becomes a different species. The clock for long-term or short-term starts once again from the date of your taking possession and the cost of acquisition is the total payment to the builder.
Since the builder handed over the possession of the flat in April 2007, if you sell the flat before the period of 3 years (March 2010), you would be earning short-term capital gains.
The exemption available u/s 54 is only on long-term capital gains arising from the sale of a residential flat, if the assessee purchases another residential flat within a stipulated time frame.
In case you sell flat (B) now, you will be required to add the short-term capital gains to your normal income and pay tax thereon at the applicable rates.
In the case of non-convertible debentures issued by an Indian corporate with interest paid every year, (which is taxable in the hands of the investor) with maturity after three years. The principal amount is returned on maturity. How do we calculate long-term capital gains — in the same fashion as we do for an equity share applying indexation? If there is gain we pay tax, if loss can it be carried over for eight years?
?RC Press
When a financial asset is transferred, the surplus or deficit is a capital gain or loss. Regular income-paying avenues like bank deposits, NSCs, Co-FDs, etc, are certainly financial assets and therefore, if we can go strictly by the letter of the law, we should be able to claim long-term capital loss even on such instruments! But generally, such instruments aren’t envisaged under capital gains taxation.
Bonds and debentures, though taxable as capital gains, the benefit of indexation is expressly not available. The only exception is the Indexed Bond issued by the government, which attracts indexation.
At present for FY07-08, I have taken a Mediclaim Insurance (MI) with National Insurance. The premium of Rs 4,000 is claimed u/s 80D of the IT Act in my Return of Income.
Similarly, my dad has MI with United India Insurance covering himself (Senior Citizen) and my mother (Non Senior Citizen) and a premium of about Rs 16,000 is claimed u/s 80D by my dad in his Return of Income.
In this year’s Budget 2008 there is a proposal where a son can pay MI premium for his parents and can claim an additional deduction u/s 80D. Our policies for FY08-09 would start from 27.4.08 ie, before the budget 2008 is passed.
For FY08-09 I would like to become a proposer (without covering myself) also with United India and cover my dad and mother and pay MI premium of about Rs 41,000. This, I am told is allowed by the insurance company.
My query is:
a) u/s 80D of IT Act besides my MI premium, of R. 4,000, can I also claim MI premium, to be paid by me now up to Rs 20,000 for my dad and up to Rs 15,000 for my mother ie, total 39,000 (4,000 for self +35,000 for my parents)
b) Is there a way out where I can also claim my own premium of Rs 4,000?
?Choudhary
1. The amendment as envisaged by the recent Budget, is slated to be effective from 1.4.08 (calendar date) and therefore, it does not depend upon the date on which the Budget is passed by the parliament.
2. For the purpose of this section, family consists of only husband, wife, and their dependent children. Parents are not a part of the family.
3. The maximum limit on the premium eligible for deduction is Rs 15,000 for covering the family. Where one of the spouses is a senior citizen, the limit is higher at Rs 20,000.
4. You may obtain cover for your parent/s. In that case, the additional limit is Rs 15,000. However, if one of the parents is a senior citizen, the additional limit is higher at Rs 20,000. Separate cover is possible, but the limit for both of them put together would be Rs 20,000.
5. Consequently, the highest benefit you can obtain is Rs 40,000.
6. Your father is free to buy yet another cover individually and pay the premium out of his assets and claim benefit of the deduction up to Rs 20,000.
7. In case you decide to cover only your father for Rs 20,000 and mother for Rs 15,000 and yourself for Rs 4,000, you will be eligible for a deduction of Rs 24,000.
8. I strongly feel that your wife can also take a policy independently and claim the benefits, provided the premiums are paid out of her assets.
I wonder if any of the insurers would accept applications for such a high insurance target for the parents, leave alone the senior citizens.
All said and done, I wonder whether ?
1. The insurer would be willing to undertake high-value policies for senior citizens.
2. The senior citizen would be willing to pay the high premium for such policies. In 2007, a senior citizen has seen his bill for Rs 5 lakh of insurance rise from Rs 12,636 to Rs 31,590.
?The authors may be contacted at wonderlandconsultants@yahoo.com
