No need to file ITR on capital loss if no other income and no refund sought

Published: July 15, 2020 1:40 AM

For computation of long term capital gains, indexed cost of acquisition, indexed cost of improvement and expenditure incurred in connection with transfer (like brokerage, commission, advertisement, expenses, etc.) are subtracted from sale consideration.

As per Section 139, it is mandatory to file ITR if gross total income exceeds basic exemption limitAs per Section 139, it is mandatory to file ITR if gross total income exceeds basic exemption limit

By Chirag Nangia

My mother is 93 years old. Is it mandatory for her to file ITR even if her income is below the exemption limit due to capital loss (no other income)? TDS has been deducted by the buyer and she is not keen to file ITR and claim refund.
—Anita Mathur
As per Section 139, it is mandatory to file ITR if gross total income exceeds basic exemption limit, i.e., Rs 5 lakh in your mother’s case. If sale of property results in loss, there is no other income and no refund is sought, then it is not mandatory to file ITR.

In 2010, I bought a plot of land and sold it in February 2020. How much income tax do I have to pay and how can I reduce it? In August 2018, I invested in an under-construction flat which I will get possession next year. Can the gains from the sale be adjusted against the cost of the flat?
—Abhijit
For computation of long term capital gains, indexed cost of acquisition, indexed cost of improvement and expenditure incurred in connection with transfer (like brokerage, commission, advertisement, expenses, etc.) are subtracted from sale consideration. This gain is charged to tax at applicable rates (presently 20%). One may, within one year before or two years after the date of sale of asset, invest the capital gains to purchase, or within a period of three years after that date construct one house in India to reduce the tax burden (Section 54F). It has been held in various cases that construction of the new house may be commenced even before the transfer of the old house. It is not necessary that the construction should commence only after such transfer. Only the construction must be completed within stipulated period from the date of transfer to be eligible for exemption. There have also been unfavourable rulings in this regard where Section 54F exemption was denied because the property was constructed long before the date of transfer of asset. Since there have been rulings both ways, conservatively, the financial gains from the plot should not be adjusted with the investment in under-construction property since the investment has been made 1.5 years before the date on which transfer took place, whereas, the law prescribes the time limit of investment, as ‘one year before’ or ‘two years after’ the date of transfer only in the case of purchase.

The writer is director, Nangia Andersen Consulting. Send your queries to fepersonalfinance@expressindia.com

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