If I buy gold jewellery for R6 lakh for personal use, will I need to pay tax at the time of purchase?
— Vipin Sood
A seller is required to collect tax @ 1% from a buyer of bullion and jewellery if the sale consideration exceeds R5 lakh and the payment is received in cash. This is applicable irrespective of whether the buyer is a manufacturer, trader or an end-user. The buyer would be able to take credit of the tax collected at source against his normal tax liability while filing the return of income. Further, a person is required to quote his PAN in all documents pertaining to a transaction where he makes payment to a dealer for purchase of bullion or jewellery of an amount of R5 lakh or more at a time, or against a bill for an amount of R5 lakh or more. In your case, tax will be collected by the seller on R6 lakh at 1% and can be claimed as tax credit/refund as the case may be, in your I-T return.
I own two flats — one, where I am residing and, the other, which is under construction. Would wealth tax be applicable in my case?
— Alpesh Menon
Wealth tax is applicable on specified assets as defined under Section 2(ea) of the Wealth Tax Act, 1957. As per judicial rulings, the word ‘building’ has to be understood “as a completely built structure having a roof, dwelling place, walls, doors, windows, electric and sanitary fittings, etc.” As an under-construction flat does not fulfil these conditions, it is an incomplete asset and cannot be treated as an asset under Section 2(ea).
Thus, you are not liable to pay wealth tax for the under-construction flat. Section 5(1) of the Act exempts any one house property of an individual from wealth tax. Thus, you could claim exemption of the same. Further, as per Finance Bill 2015, wealth tax is proposed to be abolished. Hence, it will not be applicable from FY16 onwards.
Has the deduction limit under Section 80C been raised? How much can I invest in PPF?
— Saurabh Kumar
The limit of deduction available under Section 80C (related to tax-saving investments/payments, such as life insurance premium, contribution to PF, etc, ) is R1.5 lakh. The Public Provident Fund (Amendment) Scheme, 2014, has also raised the limit of annual deposits in a PPF account from R1 lakh to R1.5 lakh.
In 2012, I bought an under-construction house on which I claimed exemption under Section 54F. The sale deed on the house is pending for execution and registration for want of possession and requisite completion certificates from municipal authorities. Will the exemption claimed be allowed even if the construction is not completed within three years from the date of transfer?
— Puneet Prakash
Section 54F states that an assessee should construct a residential house within a period of three years from the date of transfer. However, based on judicial precedents, the benefit of exemption is available where the assessee had invested the consideration received on the sale of a capital asset in the purchase of a plot of land and started construction; even if isn’t completed in all respects. Hence, in your case, the benefit of Section 54F cannot be denied.
I sold jewellery worth R8.5 lakh, which I purchased last year, for a profit. Could you advise me on the tax-saving aspect?
— Kamlesh Rao
The capital gain arising on the sale of jewellery is subject to capital gains tax as per provisions of Section 45. As the jewellery has been held by you for a period of not more than 36 months, the profit will be treated as short-term capital gains, taxable at the applicable slab rate. You cannot claim reinvestment benefit under Section 54F (investment in a residential property), 54EC (investment in NHAI/REC bonds) as these provisions are applicable only in case of sale of long-term capital assets. However, you can avail the deduction under Section 80C (life insurance premium, contribution to PPF, etc) to reduce your tax burden.
By Suresh Surana
* The writer is founder of RSM Astute Consulting Group
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