When you sell property, whether ancestral or purchased by you, what are the tax implications?
Anil Rego, CEO, Right Horizons, answers your personal income tax queries.
Marella Srinivas Subbarao: I turned 70 in March 2020.
I was working as a consultant.
Due to COVID, I had to stop working and sold my flat in October for Rs 45 lakhs; I had purchased it for Rs 8 lakhs.
Now the purchaser/bank gave two drafts of Rs 13.5 lakhs each in my and wife's name; my wife is a housewife.
As advised by some friends, I bought Rs 10.5 lakhs of bonds in my name and Rs 10.5 lakhs of bonds in my wife's name.
I do not have any other income, except LIC pension and interest income.
How do I proceed with ITR because, in the 26As, it is showing purchase of debentures in both names?
Anil Rego: I am assuming that the property was held jointly with your spouse.
You will need to use ITR-2 to file your tax returns in both your names as you have sold a house property.
Varinder Singh: Greetings of the day.
My age is 44 and want know where should I invest now onwards.
I fall in the 30 per cent tax bracket and my pending home loan is around Rs 8.5 lakh; mainly the principal is pending.
For 80C, I have LIC and home loan principal.
Please suggest where I should invest for a recurring income in future and saving for retirement or shall I invest in some property?
Anil Rego: Hi, we assume that the retirement need is a long term one.
Investing in real estate is an illiquid asset and not the best avenue to plan for your retirement.
Even if you invest into a house that you plan to let out, the rental yields are normally very low.
It is advisable to invest in various investment avenues which deliver better returns while diversifying the risk.
We suggest looking into a combination of equity and debt mutual funds, bonds, REITs (Real Estate Investment Trusts), etc.
The simplest would be to start a SIP for the long term.
I would be able to give specific details on portfolio diversification only if I know the amount you would like to invest, tenure and your risk profile.
I suggest you consult a financial planner and get a detailed review based on your needs, risk profile, etc.
Sunil Singh: I intend to sell a freehold residential property at New Delhi.
This property was bought by my grandfather in 1971, then inherited by my father and subsequently transferred to me by a gift deed.
For calculation of tax purposes, the circle rate at the time of acquisition is required.
However, circle rates in Delhi were introduced only in 2007.
How can I calculate the tax liability on sale of the property?
Anil Rego: This is an inheritance property.
In this case, the cost of acquisition should be the cost paid by the original purchaser of the property, other than inheritance or gift.
This property has been purchased in 1971 and hence you can use the base year of 2001 for purchases before this date.
You would need to use the fair market value of April 1, 2001 as the purchase price.
You can use indexation based on the CII from this period to the year of sale.
LTCG can be calculated based on this, after adding cost of improvement, if any.
Gauri Ahuja: I would like to seek clarification on tax treatment of NCDs subscribed through your office.
The details of the same are:
Name of the issuer: Indiabulls Consumer Finance
Date of Allotment: 27-06-2019
Date of redemption: 31-07-2020
Coupon basis: Zero interest
Name of Investor: Gauri Tarachand Ahuja
Amount of investment: Rs 1,50,000
Amount received on redemption: 1,66,515
Would like to understand whether the gain of Rs 16,515 is to be offered as tax on long term capital gain on zero coupon bonds or the tax treatment is different?
Anil Rego: The Zero Coupon Bond has completed one year and hence this is considered as long term for a listed bond (for unlisted bonds, it is 36 months).
It will be treated as LTCG and you can pay tax at 20 per cent + surcharge/cess, with indexation benefit.
Pradeep Sharma: My son is a US citizen who purchased a plot about 10 years ago while he was a NRI.
The funds for purchase were sent from the US.
He is now planning to sell it.
Is there any problem about repatriating the funds back to the US?
What are the tax implications and how does he go about claiming refund on TDS, if any?
He has no earnings in India. The plot was purchased for Rs 40 lakh and is expected to fetch Rs 60 lakh.
Anil Rego: Repatriation can happen up to the amount initially remitted by normal banking channels by an NRI or funds paid through NRE/FCNR account for the purchase of the property.
NRIs can avail no/lower TDS deduction by applying online for a certificate (Form 13) from the Income Tax Department.
The capital gain can be computed and filed in your son's IT returns for the year in which the sale is made, by the due date, and he can claim a refund, if any.
Amiya Kumar Banerjee: I am a service holder and receive a monthly salary from my employer.
In FY 2020-2021, the payment of salary was irregular.
Till date, I have received salary for 11 months.
The salary last received was on 13.08.2021 for the month of January and February 2021.
Taxes were deducted at source before payment.
Tax deducted for nine months (April 20 to December 20) were duly deposited and reflected in Form 26AS and Part A of the Provisional Form 16.
Taxes were deducted from the salary of January and February 2021 but not yet visible in 26AS or Part A (provisional) of Form 16.
In the meantime, Part B of Form 16 for the year 2021-22 AY, last updated on July 23, 2021, has been officially handed over to me by the employer which shows 'Salary as per provision contained in section 17(i); as salary for 12 months.
Other figures in that statement including tax calculation are based on 12 months' salary.
I sought clarification in this regard from my employer but nothing is informed.
Under the circumstances, can you kindly advise whether my I-T return for FY 2020-2021 (2021-2022 AY) is to be submitted based on nine months's pay, 11 months's pay or 12 months's pay.
Anil Rego: In a financial year the following are taxable under salary:
- Amount received as salary in FY
- Amount due as salary in FY, whether received or not
- Any arrears of salary received (if not taxed in previous FY)
If the TDS is not confirmed in 26AS, that means the employer has deducted taxes while paying you the salary but has not deposited the same with the I-T department.
You need to keep your salary slips, bank statements and Form 16 carefully and submit it as proof, if required.
You can continue to pursue your employer for payment of the additional month's salary that has not been received by you.
Ideally, you can file returns for 12 months, as per the Form 16 provided to you.
Finally, if your issue is not resolved and your 26AS continues to not show the TDS, you can write a detailed mail with backups to the assessing officer and keep it as proof.
Do you have any personal income tax query? Please mail us at email@example.com with the subject line 'Ask Anil' and Anil Rego will answer all your tax queries.
Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.
You can find more of Mr Rego's answers here.
Feature Presentation: Ashish Narsale/Rediff.com