Q. I sold a flat for ₹40 lakh in February 2019. I had bought the property in my name in September 2001 for ₹12 lakh. Now, I want to use this entire money to rebuild an old house which is in the name of my wife. My wife, a homemaker, is not paying I-T/filing income tax returns. However, I am paying I-T on rental value received. The entire sale value is deposited in a bank FD. Please guide me as to whether I can use this money over two financial years (FYs) for the said purpose and still claim tax exemption on long term capital gains (LTCG). If yes, how can I establish it in I-T returns?
Rao V.B.
A. To utilise the proceeds to rebuild (construct) another house property, the house should be in your name. Joint ownership of the house property can also be considered.
In order to avail LTCG exemption by utilising the proceeds from the sale of house property over a period of more than one financial year, the capital gain is to be deposited in a Capital Gains Deposits Scheme (CGDS), which is available in all nationalised banks, before filing of returns for assessment year 2019-20 or before the due date for filing of the return.
Also, for construction of the house, utilise the amount lying in CGDS from time to time within three years of the sale of the original property.
Further, you are eligible for indexation while calculating the capital gains for the sale of the old property.
Q. I am 78 years plus. I am writing this on my behalf and my three colleagues (all of us worked together in Defence) of almost the same age. We have between ₹2 lakh to ₹5 lakh worth shares in paper form, purchased eight to 12 years ago. On enquiries with Kotak Securities Ltd., we were told that there were no transactions taking place on the BSE and the NSE and therefore, we cannot sell these shares. We have other shares purchased last year and this year, which are dematted. We have sold them during this financial year. The sale value we received is between ₹3-3.5 lakh. The profit we have got now varies from ₹2 to ₹2.5 lakh. How can we show this income\profit? Should we get any statement from Kotak Securities?
K.V. Ananthanarayanan
A. Selling of securities falls under the head ‘Income from Capital Gains.’ Equity shares are considered capital assets as per the Income Tax Act, 1961 and selling the same within one year amounts to short-term capital gains and beyond a year, it is a long-term gain. In your case, as the holding period is more than a year, it is a long-term capital asset.
For computation of long-term capital gain or loss, the market value of the equity shares that were sold by you as on January 31, 2018 (closing) is to be ascertained.
Sale value less the market value as on January 31, 2018 is the gain. This process is to be repeated for all the equity shares sold.
If the total of such long term gains exceeds ₹100,000 in a financial year, then the excess is taxed at 10% as capital gains.
It is to be noted that this is the only procedure of computation of capital gains as laid out by the act and only transfer expenses are allowed to be reduced from the sale proceeds. A copy of the statement from Kotak Mahindra should be obtained.
( N. Sree Kanth is partner, GSS & Associates, Chartered Accountants, Chennai)
