I earned long-term capital gain by selling a plot of land and wish to construct a residential flat from the proceeds. Will I lose the tax exemption if the construction is not completed within three years of the sale?

? Ashok Kumar

As per Section 54F, the taxpayer has to construct a residential house within three years of the date of transfer to be eligible for exemption. Section 54F, being a beneficial provision, should be construed liberally. Thus, if the entire net consideration is invested in the construction of the house, it will be deemed that sufficient steps have been taken by the taxpayer to satisfy the requirements of Section 54F. As such, you can avail the exemption under Section 54F even if the construction is not completed within three years.

I am a salaried employee and will be transferred to Delhi from Mumbai. I will be provided with 18 days? hotel accommodation by my employer. Will the value of this facility be included in my income for tax purpose?

? Pramod Shetty

Normally, the perquisite value of any hotel accommodation provided to an employee is taxable in the hands of the employee. However, if such an accommodation is provided on transfer and the total period of hotel stay doesn?t exceed 15 days in a financial year, it is not chargeable to tax. In your case, the perquisite value of 15 days will be exempt and, for the remaining three days, it will be taxable.

Six months ago, I took a flat on lease for 15 years. Since then, it has been lying vacant. I am planning to sublet this flat and earn rental income. Please guide me about tax aspect.

? Rakesh Gupta

Under the Income Tax Act, a lessee is treated as a ?deemed owner? of the house if the lease is for 12 years or more. As you have taken a flat on lease for 15 years, you will be the deemed owner of the flat. Accordingly, the income from sub-letting will be treated as income from house property.

I have 250 gm of gold jewellery, which belongs to my grand parents. I wish to sell it and invest the proceeds in business. I don?t possess any document to show the acquisition cost as it is more than 40 years old. Do I need to pay any tax on such an income?

? DP Rao

As per the I-T Act, the definition of capital assets includes jewellery. Any profit and gains arising from the transfer of a capital asset will be chargeable to income tax under the head, capital gain, and deemed to be the income of the previous year in which the transfer took place. Accordingly, in your case, capital gain income is taxable in your hands if you wish to sell the jewellery.

The income chargeable under the head, capital gain, will be computed by deducting from the full value of the consideration received as a result of the transfer of the capital assets, the cost of acquisition of the assets and the cost of any improvement thereto and expenditure incurred wholly and exclusively in connection with such transfer.

The cost of acquisition of the capital assets, in case of their becoming the property of the assessee by succession, inheritance or devolution, will be deemed to be the cost for which the previous owner of the assets acquired it, as increased by the cost of any improvement of the assets incurred by the previous owner or the assessee, as the case may be.

In your case, in absence of information, you can take the fair market value as on April 1, 1981, as cost of acquisition and subject to cost of indexation, the capital gain can be calculated.

However, capital gain on sale of jewellery is eligible for exemption by investing in a residential property or certain specified government bonds.

The writer is founder of RSM Astute Consulting Group

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