Immovable Property

How to compute Indexed cost of acquisition of the property and under which case, it can be used to compute capital Gains?

Ans. Indexed cost of acquisition is the adjusted cost of acquisition which is calculated in case of computing long term capital gains by using the Cost Inflation Index in the following manner:

Indexed Cost of Acquistion=Cost of acquisition * CII for the year in which asset is transferred/ CII for the year in which asset was acquired by the assessee

If an NRI is transferring his immovable property as a Gift, is there any capital gain tax implications?

Ans. Gift is not treated as ‘Transfer’ u/s 2(47) of the Income-tax Act,1961 and accordingly capital gain will not arise in case immovable property is gifted by an NRI to another person.

However, income tax shall be levied in the hands of the receipient in certain cases.

I have acquired the property under inheritance from my father in the year 2013-14. However, my father has purchased the property in the year 1985-86 for Rs.1 Lakh. What will be year of acquisition of property for me and cost of acquisition thereof?

Ans. Year of acquisition will be 1985-86, as in case of properties acquired by way of inheritance, gifts etc. period of holding of the previous owner shall be included while calculating the period of holding of the asset for the person to whom property is inherited and/or gifted [Section 2(42A)]. Further, as per section 49(4) of the Act, cost of acquisition of the property will be the cost for which previous owner i.e. Father had acquired it i.e. Rs.1 lakh.

Is there any capital gain tax implication in case where property is compulsorily acquired by the Government authorities?

Ans. Compulsory acquisition of the property is regarded as ‘transfer’ within the meaning of Section 2(47) and gain arising thereof will be subject to tax in the year in which the property was compulsorily acquired.

The amount of tax deducted at source on sales consideration is more than the actual tax liability that should be paid on the amount of capital gains. Is there any way to receive the amount of sales consideration subject to the lower rate of TDS?

Ans. Section 197 of the Act provides for obtaining the Tax Exemption Certificate in case where actual tax liability of the assessee is lower than the amount of tax to be deducted at source under the provisions of the Act. In this case, one has to make an application to the Jurisdiction Assessing officer submitting the necessary supporting which shows that actual tax liability of the assessee is lower than the amount of TDS and accordingly an order u/s 197 of the Act will be issued by the AO permitting the payer to deduct the tax at lower rate.

I have sold an immovable property and there was a capital loss of Rs.10 lakhs during the F.Y.2015-16. Is it possible to carry forward such loss to the subsequent year in order to set off against the capital gains that may arise in future?

Ans. The provisions of the Income-tax Act, 1961 to offset the Losses against the Gains in the following situation:-

Set off of gains against loss in case of sale on different dates in the same Financial Year.
The Gains earned on transfer of capital assets should be set off against Losses incurred during the same financial year (i.e. during April – March) subject to the provisions of Income-tax Act,1961.

Carry Forward of Unabsorbed Capital Loss in subsequent year.

If the loss cannot be set off or entirely be setoff in the same year, it is allowed to be carried forward to subsequent year provided return of income is filed within the prescribed time limit.

Is filing of return of income compulsory for claiming the various exemptions from capital gains on sale of immovable property?

Ans. Yes, the assessee has to file the return of income by prescribed due date for claiming the exemptions.

I have sold a residential house, earning capital gains of Rs.5 lakhs. However, I cannot invest this amount in a new residential property till the date of filing of my return of Income although I intend to invest it afterwards. Is there any alternate provision to claim the exemption although investment in new house is made after filing of return?

Ans. In the aforesaid case, one can avail the benefit of Capital Gain Account Scheme as notified under the Income-tax Act, 1961. One can deposit the amount of sales consideration or the amount of capital gains, before due date of filing of return of income, in a Separate bank account i.e. ‘Capital Gain Account’. Further the amount deposited in the said account is required to be invested in the new property and/or asset within the stipulated time period under respective provisions of the Act dealing with the benefit of exemption.

What if the whole or any part of amount invested in Capital Gain Account scheme is not utilized for purchase of New property within 2 year or construction of the new property within 3 years, as the case may be?

Ans. Amount which is not invested in the new property would be subject to the long term capital gain tax in the year in which the period of 2 years or 3 years, as the case may be, is completed.