• Long Term Capital Gains Query

Hi

I bought a plot 3 years back on my name and another plot 2 years back on my wife's name. My wife is a home maker and I purchased that 2nd plot on her name with my funds (by taking a personal loan at that time).

I own a flat which is purchased in 2008. Now, I am buying a 20 year old house worth 70 lakhs by end of this month. I want to sell both of our plots but it would take time to do those transactions. 
Therefore, I'm taking a home loan of 55 lakhs and arranging my own funds of 15 lakhs to purchase the house. Below are my questions

1) I read in articles that LTCG tax can be avoided if the amounts received by selling the plots is invested in a purchase of residential property which is done 1 year before the sale of the plots.
Therefore, can we both sell our plots with in one year of our house pruchase i.e., before Dec 2018 and invest that total money to pay a part of our loan? For ex, If I'm going to get 25 lakhs in total 
(10 lakhs for her plot and 15 for my plot), can I use it to repay that same amount i.e., 25 lakhs of the 65lakh loan I have taken and avoid LTCG tax? I suppose that is what it means by investing 
LTCG in house property purchased within an year of selling immovable assets, please clarify.

2) Do I need to include my wife's name also in the sale deed of our purchased house if I need to use the money from selling her plot also or is it OK if the house is on my name but both plot sale amounts are invested within one year to reduce my home loan burden?

Thanks in advance.
Asked 7 years ago in Property Law
Religion: Hindu

2 answers received in 30 minutes.

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6 Answers

1) you can purchase plot now for Rs 70 lakhs in your and that of wife name

2) sell plot standing in your name and wife name for Rs 25 lakhs within period of one year and use sale proceeds fir repayment of housing loan and claim benefit of LTCG

3)house should be purchased injoint names

Ajay Sethi
Advocate, Mumbai
96803 Answers
7810 Consultations

1. Yes LTCG tax can be avoided if the amounts received by selling the plots is invested in a purchase of residential property which is done 1 year before the sale of the plots.

2. Yes the house must be purchased in the name of both i.e., you and your wife

Regards

Anilesh Tewari
Advocate, New Delhi
18090 Answers
377 Consultations

you may claim LTCG exemption U/s 54F by reinvesting the whole sale proceeds of the plot by purchasing an apartment in joint names

2) if your wife is giving you Rs 10 lakhs after payment of taxes and property is bought by you in your name only you will have to show receipt of Rs 10 lakhs as gift in your income tax returns

Ajay Sethi
Advocate, Mumbai
96803 Answers
7810 Consultations

Dear Client,

Only if the property purchase in joint ownership, exception will available, other wise if new property purchased in ur name only than sale consideration of property in her name will give u no exemption.

And she only can sell the property and would be subject to short term capital gain ( property held for 24 months) Previous purchase of new property will have no consequences.

But tax rate will lower 15%.

Yogendra Singh Rajawat
Advocate, Jaipur
22987 Answers
31 Consultations

Calculate Indexed Cost and LTCG (Long Term Capital Gain) for period upto 31.03.2017. Indexed Cost & LTCG Calculator-New (w.e.f. 01.04.2017) ... If cost of new asset is greater than the net consideration received, the entire capital gain is exempt.

Let's assume you buy a property for Rs 25 lakh and sell it after five years for Rs 35 lakh, making a profit of Rs 10 lakh. However, your actual gain will be lower after indexation. Long-term capital gains from real estate are taxed at 20%. You cannot claim regular tax deductions against long-term capital gains.

Any profit booked after three years of buying the property is considered a long-term gain. The calculation is the same as that for short-term gain, except that the cost of acquisition and improvement is adjusted for inflation (called indexation ).

Houses are a popular investment option. Long-term capital gains from selling a house get tax exemption if they are invested in buying or building a new house. The new house has to be bought one year before the transfer of the first house or within two years after the sale. The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.

If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. When you buy a plot to build a house, the cost of land is included in the construction cost. Even buying an under-construction property entitles you to tax deduction.

If you intend to buy property jointly on your wife's name too, then the plot on her name also can be sold and you both can jointly buy a new house property to claim exemptions on LTCG

T Kalaiselvan
Advocate, Vellore
87004 Answers
2335 Consultations

1) Her buying price 2 years ago was 7 lakhs and selling price now is 10 lakhs. Therefore capital gains are 3 lakhs. Since she is a home maker without any income, does she need to pay flat 20% LTCG tax on the 3 lakhs or can we deduct 2.5 lakhs from it since 0 - 2.5lakhs has no tax as per normal IT slabs and pay 5% tax on remaining 50,000?

You cannot claim regular tax deductions against long-term capital gains. Tax on such gains has to be computed separately. If your total income is below the tax exemption limit (Rs 2 lakh for individuals other than senior citizens), only the part of long-term capital gains above the exemption limit will be taxed (at 20%). Unlike in shortterm gains, losses from long-term assets can be set off only against gains from long-term assets.

2) If she is giving that 10 lakhs to me after paying whatever type of tax from #1 above and I'm repaying that sum of my home loan with that, should I also need to show it as income and pay tax or is it not necessary since she already paid it?

Any income in your hand is taxable beyond the specified limit, hence you decide.

T Kalaiselvan
Advocate, Vellore
87004 Answers
2335 Consultations

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