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Capital gain important question

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Benevolent
kukdookoo

Friends my senior citizen relative is selling his property after 17 years. capital gain tax is 70000. profit is 6 lac. does he need to put all profit money in government bond to exempt from tax?which bond to be exact? he lives on interest income and has no job. if he does not put money in government bond then his profit 6 lac will be added to his interest income?

new zealand and many advanced countries have no capital gain tax

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RECL NHAI

For exact tax calculation u need to approach a CA because there must be indexation benefit and also indexed cost of improvement if any renovation done in the house. Ltcg is taxed at 20% but if there is slot available in basic exemption limit then this gain fits there.
Overall good amount of calculations are required so better consult a CA he may also help you with other investment options in 80c if that works out

Benevolent Benevolent
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thanku sirg. what is recl? how n from where to purchase bonds of recl and nhai?how are they taxed, lockin period and interest rate?
it is simple piece of land with no renovation. this website is showing tax at 10%
https://imgur.com/a/l...b1
what are other investment options in 80c? and say his profit from sale is 60000 then will it be added to his interest income in his total income slab?

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Deal Subedar Deal Subedar
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i forgot to show sale of property in 2018 which i bought on 2006 can i show it now?

Deal Subedar Deal Subedar
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Show before the tax man reminds you

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Generous Generous
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Read section 54 of it act

Deal Subedar Deal Subedar
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@kukdookoo new Zealand and many advance country have any other facilities and drawbacks as well….. So don’t compare just for the sake of it…..

Benevolent Benevolent
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sirg no country is perfect but nz is better than india sorry to say. zero corruption, less taxes and overall better std of living

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Budding Star Budding Star
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long term capital gain should be invested in buying in other residential property (we will get the exemepton under 54 and 54f)
If u want invest in NHAI OR REC bonds for period of 5 years ( if withdraw investment withdraw investment with ij 5 years then we need pay tax )

Benevolent Benevolent
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thanku sirg. what is recl? how n from where to purchase bonds of recl and nhai?how are they taxed, lockin period and interest rate?

Benevolent Benevolent
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What is diff b/w section 54 and 54 f?
article say that the exemption under Section 54 is available on long-term Capital Gain on sale of a House Property. Exemption under Section 54F is available on long-term Capital Gain on sale of any asset other than a House Property. https://cleartax.in/s/section-54-capital-gains-...
but below mentioned table in same article mentions residential property. where is section 54 f used for?

Budding Star Budding Star
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Yes exactly right.
I have no idea about how to invest in NHAI bonds
But it is not good idea to invest in nhai or rec bonds because they offer very low interest (lessthan 6%) and locking period is 5 year or more

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Benevolent Benevolent
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the seller has 2 years to invest money in new residential property from the date of sales. if for some reason the seller does not do that then can the seller deposit the same amount as capital gains tax after or within 2 years?or can the seller deposit the amount in bonds within 2 years he is unable to cancels the plan to purchase a new property?

Deal Subedar Deal Subedar
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can the seller show sale after 2 yr. in it return

Benevolent Benevolent
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apka prob kya ha agar koi swal puche to

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The PostMighty The PostMighty
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Did u calculate the profit using the indexed cost or is it using original cost?

Benevolent Benevolent
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Calculated from here https://www.moneycontrol.com/personal-finance/t...

Purchase value 176500 (22500 stamp duty included) in 2004 in either March or April. Sale value for 825000 Sale will happen this month or next.

Mai aapko tag karne hi vala tha

The PostMighty The PostMighty
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For calculating capital gains tax on sale of property, you will have to mandatorily take benefit of indexation and calculate tax @ 20% on such indexed profit. In your case, the tax is getting calculated in the range of 67-72k (based on the indexed profit of Rs. 3.35 to 3.6 lacs)… Further, if the senior citizen’s income before Capital gains is less than the minimum exemption limit ( i.e. 3 lacs for Sr. Citizen in 60-80 age and 5 lacs in 80+ age bracket), then capital gains will be reduced to the extent of the shortfall in minimum exemption limit. You can check your case and decide.

Thus the profit to be reinvested is around 3.35 to 3.6 lacs and not 6 lacs as originally stated by you. You can bring down that profit further, if you are incurring costs in relation to that sale such as brokerage or commission or traveling etc. In case, there were certain improvements done to the property during the period of holding, those also can be claimed as deduction with indexation benefit.

Benevolent Benevolent
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Thank u sirg. please clear two important questions, how u calculate indexed profit of 3.35 to 3.6 lakh? Is there any calculator for it?
please explain this line
Further, if the senior citizen’s income before Capital gains is less than the minimum exemption limit ( i.e. 3 lacs for Sr. Citizen in 60-80 age and 5 lacs in 80+ age bracket), then capital gains will be reduced to the extent of the shortfall in minimum exemption limit.

Deal Subedar Deal Subedar
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Step1- first we have to calculate cost of acquisitions. It includes brokerage , commission paid etc.
Step- 2- Then we have to calculate index cost of acquisitions. Year in which asset acquired is called base year. It will be calculated to year in which property sold. ie if acquired in 2002 then we have take 2002 as base year.
Step 3- Fair market value or sell price whichever is higher will be taking as selling price. And that price will be deducted by cost of acquisitions.
Step 4- any excess amount that come(after deducting sale based expense) is called taxable long term capital income as holding period is more.
Step 5- 20 percent is tax rate for long term capital gain.

Helpful Helpful
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OP, read my reply carefully along with the above.

1)For tax purpose, the tax is calculated on the sale deed values.

Sale deed value while buying the property, get this from the sale deed, RsX
Sale deed value while selling the property, get this from the new sale deed, RsY

2)Cost of the acquisition : Z = Y – X + registration charges for X + brokerage charges for X
3)Now do the indexing for Z.
4)At the end there will be loss instead of profit, hence no tax (for most of the REs).

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The PostMighty The PostMighty
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Calculation of Long Term Capital Gains as under:

1. Sale Value 825000
2. Less: Indexed Cost of Acquisition 487400
(176500 / 109 [Index for FY 2003-04] * 301 [Index for FY 2020-21])
3. Capital Gains 337600

So if the senior citizen has total interest income of Rs. 2 lacs and if his age is between 60 to 80, then his minimum exemption limit is Rs. 3 lacs, so for him the taxable capital gains will be 237600 (i.e. 337600 less 100000 [3 lacs minimum exemption less 2 lacs interest income]

Benevolent Benevolent
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@Maverickz @Kakarrot @ramadesidime
Thank you sir’s for all your help. A little correction purchase date April 2004 amount 176500. Sale date will be in April next month FY 2021-2022. Where is cost inflation index for this year? Taking 301 of FY 2020-2021 just for the sake of clarity
176500/113 * 301= 470146.01/-
Purchase value as per indexation=470146.01/-
Capital Gains= 825000-470146.01= 354853.99
LTCG tax= 20%
So, C.G. tax= 70970.79/-
Is the above calculation correct sirg?

@Maverickz sir for this line one question
if the senior citizen has total interest income of Rs. 2 lacs and if his age is between 60 to 80, then his minimum exemption limit is Rs. 3 lacs, so for him the taxable capital gains will be 237600 (i.e. 337600 less 100000 [3 lacs minimum exemption less 2 lacs interest income]
you said minimum exemption is 3 lacs. is it besides 80c limit and 80TTA? I am confused with this line?

last few doubts
a. is capital gains tax added with interest income or is it treated separately?
b. supposse a person does not deposit capital gain tax in 6 months and within 2 years seller’s mind changes that he does not want new property then will he have to deposit interest with capital gain tax?
c. supposse sales deed and amount is transferred on 1st april then within 6 months from 1st april seller needs to deposit tax amount?
d. nhai and recl bonds give 5% interest which is paid annually. It is treated as simple interest. does it make sense in terms of opportunity cost if seller deposits capital gain tax on the last day and till the time invest the tax money and the rest of it somewhere else which pays more than 5%?
e. brokerage etc. will be deducted from the capital gains amount, right?

Deal Subedar Deal Subedar
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.

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Deal Subedar Deal Subedar
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i forgot to show sale of property in 2018,can i show it now?

The PostMighty The PostMighty
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There are many who forget to show it permanently joy joy joy

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Deal Subedar Deal Subedar
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if i have ltcg from property and no other income and my ltcg is less than taxable income still i have to file itr?

Deal Lieutenant Deal Lieutenant
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Yes, you have to file and pay tax on capital gains, even if the gains are less than taxable income.

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Benevolent Benevolent
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@Maverickz @Bk100 @ramadesidime @Ramta_Jogi

Sirg property sold by senior citizen today. Just clearing the final doubt
Purchase date April 2004 amount 176500. Sale date today. Taking 301 cost inflation index of FY 2020-2021 just for the sake of clarity

176500/113 * 301= 470146.01/-

Purchase value as per indexation=470146.01/-

Capital Gains= 825000-470146.01= 354853.99

LTCG tax= 20%

So, C.G. tax= 70970.79/-

The senior citizen is not going for new property or for nhai, recl bonds. From purchase value of 470146 brokerage and other expense will be deducted. Since this is senior citizen with only interest income and 80c, 80dd covered can you please mention again under which section more deductions will be available if total income is less than 5 lacs?

As cost inflation index for FY 2021-2022 will be declared soon by the income tax department, so whatever be the capital gain tax will be deposited next year at the time of filing return. Are you sure that there is no penalty on non filing of the same under advance tax?

Benevolent Benevolent
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@Maverickz
Sir please clear last doubts
The senior citizen is not going for new property or for nhai, recl bonds. From purchase value of 470146 brokerage and other expense will be deducted. Since this is senior citizen with only interest income and 80c, 80dd covered can you please mention again under which section more deductions will be available if total income is less than 5 lacs?

As cost inflation index for FY 2021-2022 will be declared soon by the income tax department, so whatever be the capital gain tax will be deposited next year at the time of filing return. Are you sure that there is no penalty on non filing of the same under advance tax?

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Deal Subedar Deal Subedar
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for claiming brokerage and Renovation, do we need to show receipts? as these expense are mostly in cash.

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Benevolent Benevolent
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@Maverickz
Advance tax will not be applicable to this senior citizen as he is not an NRI and has no income from business or profession.

sir about above line
Who needs to pay Advance Tax?
All assesses including salaried employees, self-employed professionals, businessmen etc. are required to pay Advance Tax, where the tax payable even after reducing TDS already is Rs 10,000 or more.
https://cleartax.in/s/interest-imposed-by-incom...
https://cleartax.in/s/interest-imposed-by-incom...

They have not mentioned anything about senior citizens. Since cii for fy 2021-2022 is not released then how much advance tax is this person supposed to pay? If same amount or more amount is in tds from bank fd interest then should one still pay advance tax??

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The PostMighty The PostMighty
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Further, section 44AD cannot be used for commission income.

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

> Business of plying, hiring or leasing of goods carriages referred to in section 44AE.

> A person who is carrying on any agency business.

> A person who is earning income in the nature of commission or brokerage

Check this link out:
https://taxguru.in/income-tax/income-tax-provis...

The PostMighty The PostMighty
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ITR u/s 44AD should be only for presumptive income from business. Since the Senior Citizen does not have any business, he should not file ITR u/s 44AD. Yes. Previous Year’s returns were wrongly filed. Since there is no tax liability involved, let it be as it is and the senior citizen can file regular ITR in the current year. Senior citizens who are exempt from paying advance tax can pay the total tax amount at the time of filing their returns and no interest u/s 234B and 234C will be levied if the returns are filed on or before the due date (i.e July 2022 – unless extended)

If the senior citizen goes for ITR u/s 44AD (which is wrong), then he would be required to pay the entire income tax amount or or before March 15, 2022 (i.e. the last date for the final advance tax installment for FY 2021-22).

Benevolent Benevolent
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Thank you sir. What form is regular itr which should be filed in current year and for year 2020-2021?

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Benevolent Benevolent
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@Maverickz
sir more doubts
1. senior citizen has no business or rental income in fy 20-21 only interest income. he was wrongly filing return under section 44ad in previous years. should he file under itr 1 for fy 20-21?

2. proper calculation of capital gain please correct where wrong

purchase date 05.04.2004
amount 154000 (sorry mentioned wrongly earlier)
stamp duty, registration, pasting fee 29770
brokerage 8250

sale date 07.04.2021
sale price 825000

as per indexation(154000+29770+8250)/113*317 = 538675.57/-

Capital gain= 825000-538675.57= 286324.43/-

286324.43*20%= 57264.88/-

The property was simple land. The senior citizen paid 6-7000 per year to get it cleaned and maintained but as it was done in cash so not added in purchase. The buyer forced the senior citizen to pay for 50% of stamp duty at the time of sales. Also paid in cash so effect not taken. hope it is ok.

a. is above calculation correct?

please help in calculating opportunity cost. 286325 @ 5.1% in nhai/recl bond. lock in period 5 years. interest paid yearly and fully taxable vs tax of 57265 paid as capital gain. which one seems a better choice? do nhai/recl deduct tds?

c. projection for senior citizen for fy 21-22

interest income 4.5l-4.8l fd
savings bank interest income 35000
80c 1.5l
80d 20000
80tta 50000

no business income. only above capital gain impact
can he take rebate under section 87a as per this post https://www.desidime.com/discussions/capital-ga...

what will be estimated it tax here?

The PostMighty The PostMighty
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Answers:
1. He can file ITR-1 for FY 20-21.
2. Capital Gains calculation is correct. Cess on income tax of 4% is to be added.
3. The assessee cannot claim rebate u/s 87A as the total income after all deductions is above 5 lacs.
4. Estimated Tax liability for FY 21-22 will be approximate to the LTCG tax as the income other than LTCG (net of Section 80 deductions assuming that the senior citizen earns maximum 4.8 lacs interest) is almost 3 lacs (I.e. the zero tax limit for senior citizens)
5. No TDS deducted on interest payment on LTCG bonds.
6. Choice of paying tax v/s investing in LTCG bonds depends on what is the alternate available with the senior citizen to invest the capital gains amount. If he is going to invest in FD, then bonds are good as it would help him to save tax and also earn similar income as interest.

Benevolent Benevolent
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@Maverickz
sir you have mentioned in this post https://www.desidime.com/discussions/capital-ga... that 1.9l+3.54l will be added. one confusion are these two added or the shortfall of 1.1l is first deducted from 3.54l and then it is added to 1.9l?

The PostMighty The PostMighty
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Both the amounts 1.9 lacs and 3.54 lacs are added to arrive at the total taxable income of 5.44 lacs. However, while calculating tax on LTCG, benefit of 1.1 lacs is available (as non-LTCG income is less than 3 lacs), hence LTCG tax will be calculated on 2.44 lacs (3.54 – 1.1).

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