- Q) I purchased a flat by availing a housing term loan (HTL). If I sell a plot purchased in 1989 and credit the sale proceeds to the HTL account, can I avoid paying Capital Gains tax?
PK Manokaran
A) You cannot avoid Capital Gains if the proceeds of the sale of a capital asset are credited to a specific account.
Alternatively, you may look to avail exemptions as provided in the Income Tax Act, 1961 such as Section 54F or Section 54EC, and check whether they apply to you.
Conditions and the applicability of both sections are elucidated below.
You may choose to opt for exemption under Section 54F if you invest an amount equal to or higher than the Long Term Capital Gains arising from the transfer of the plot and satisfy all the following conditions:
- The new residential property is to be purchased within a period two years from the date of transfer of the original capital asset or constructed within three years from the date of transfer of the original capital asset (plot) or a new residential property purchased within a year prior to the transfer of the capital asset.
- Once invested in the new residential property, the same is not to be transferred within three years.
- You should not own more than one residential property, other than the new asset, on the date of transfer of the original asset. In other words, you should not own any other residential properties other than the flat you mentioned in the query.
- You should not purchase any residential property, other than the new asset, within a period of one year after the date of transfer of the original asset.
- You should not construct any residential property, other than the new asset, within a period of three years after the date of transfer of the original asset
Bond investment
You may alternatively invest in bonds under Section 54EC of the Income Tax Act, 1961, up to an amount of ₹50 lakh within six months from the date of transfer of the original asset in order to claim the exemption of the LTCG arising from the sale of the plot.
- Q)I’m having a query on filing my income tax return. My total income (only salaried income, no other additional income) in the last financial year was ₹5,24,000 (After ₹90,000 was exempted under 80C components such as PF, PPF, etc). In the 80G category, I made ₹40,500 which is partially 50 per cent deductible (₹40,000) and partially 100 per cent deductible (₹500). So, totally, I can avail exemption of ₹20,500 in this category. I will also claim a bike insurance premium of ₹1,500 as well. So finally, I’m ending up with ₹5,02,000 as the net total income. Is there any other exemption category available that I can choose for ₹2,000 so that I would be tax-free.
(Note: I didn’t avail HRA exemption for last year as my brother availed it as we live in the same house. Shall I legally claim HRA exemption for the same house even though my brother had already claimed the amount?)
Vineeth
A) As a salaried employee, you are eligible for a standard deduction of ₹50,000 on your salary income.
Further, any professional taxes deducted by your employee on your behalf can also be claimed as a deduction. It is to be noted that bike insurance does not qualify as a deduction under Chapter VI A of the Income Tax Act.
HRA can be claimed by you if you contribute to the rent paid for the premises along with your brother. It is to be ensured that the rental agreement is entered between the landlord, yourself and your brother, and you are in possession of the rental receipts carrying your and your brother’s names along with each person’s contribution.
Further, you can explore the possibility of increasing your contributions in 80C-related investments to save tax.
(The writer is a partner, GSS and Associates, Chartered Accountants, Chennai)