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How is LTCG tabulated on sale of residence?

How is LTCG tabulated on sale of residence?

My father purchased a home for 1 crore in July 2008 and gifted it to me in Could 2014 immediately after paying out the required stamp costs. The residence was sold for 14 crore in November 2021. I want to know how the very long time period money gains (LTCG) tax will apply in this situation?  Also, how will tax be computed If possibly 70% or 90% of funds gains is invested in new house? Can I make investments in a assets which would be handed over to me in March 2025?

—Name withheld on request

 

As the property has been held for much more than two many years (period of time of holding calculated from the day of obtain of home by the owner who truly acquired the property), any cash gains created on this will be deemed as LTCG.   If the true sale thought is decrease than the stamp duty value by a lot more than 10%, the stamp responsibility worth is regarded as the considered sale thing to consider. 

 You are suitable for the profit of changing the Price of Acquisition (‘CoA’) primarily based on the relevant Value Inflation Index (‘CII’) for FY 2008-09. Even further, stamp duty cost paid at the time of gifting shall also form section of CoA, and CII for FY 2014-15 will apply. 

LTCG cash flow is taxed at a flat amount of 20% moreover relevant surcharge (limited to 15 % on LTCG) and instruction cess. In situation your taxable income (other than LTCG) is beneath 2.5 lakh (tax exemption limit for folks up to 60 several years of age), advantage of the unexhausted exemption limit shall be authorized versus the LTCG and the balance gain will be taxed at 20%.

 Under part 54, LTCG from the sale of a residential residence is allowed for deduction if the gains are both invested to invest in another household property (‘new house’) inside of a person year prior to or two many years or to assemble a new residence in a few many years of the transfer of the house. The deduction is out there to the extent of LTCG invested. If the volume of LTCG is increased than the charge of the new home procured or built, the difference concerning the total of LTCG and expense of new property (i.e. 30% and 10%, respectively in your case) shall be taxable in the 12 months of sale as LTCG. 

In case, you are not able to invest in/build the new dwelling until the date of filing the return of money for FY 2021-22 (owing date is 31 July), the LTCG not used (in full or section) can be deposited in Funds Gains Deposit Account Scheme with a specified lender and exemption claimed under part 54 of the Act. The new household can be acquired or constructed by withdrawing the quantity from the account inside the specified time limit of 2 or 3 yrs, as applicable. 

We fully grasp that you approach to make investments in an below-construction home, whose possession is expected in March 2025. Some courts have held that completion of design of the house or occupation thereof is not a stipulated prerequisite and as lengthy as the LTCG has been invested in design of a residential property within just 3 years, the exemption should be obtainable up to that extent. 

Another college of assumed is that the assets need to have been absolutely constructed and completely ready for use, within the stipulated period of 3 a long time. As the regulation stipulates that financial investment is necessary to be designed in a household assets, in the circumstance of below-design home, the household home will come into existence only on the day of completion of construction/ possession, which should really be performed in tjree yrs from transfer.

In look at of the over, a situation that expenditure in under construction property (even if construction not accomplished), may well be highly litigious specifically exactly where at the time of financial commitment by itself the assessee is mindful that the design may well get outside of 3 years.

Parizad Sirwalla is spouse and head, international mobility expert services, tax, KPMG in India.

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