• Selling a flat in Kolkata

Hello Sir,
We have this flat that was brought in the year 2003. The valuation of the property then was ~4.25 lacs. We extracted out the current market value of the property by the West Bengal Directorate of Registration and it stood at ~22 lacs. The prospective buyers are offering a price of 14-16 lacs. Considering the selling price of 14-16 lacs, would the income from the sell be considered as Long Term Capital Loss ?
If yes, what needs to be done by my father(retired Central Government pensioner) with respect to Income Tax formalities ?
How would this Capital Loss be adjusted ? 

Thanks in advance.
Asked 4 years ago in Property Law
Religion: Hindu

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9 Answers

Yes the income from the sale would be considered as long term capital gains. The long term gopal gains are calculated by

deduction of Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price. Indexation is done by applying CII (cost inflation index). This increases your cost base (and lowers your gains) since the purchase price is adjusted for the impact of inflation.

Also if after calculation with inflation if there are no gains or loss is there you are not liable for any capital gain tax.

Otherwise if there Are gains you can use Exemption of tax under 54F Income tax act-

If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions

(a) You purchase ONE house within 1 yr before the date of transfer or 2 yrs after or construct ONE house within 3 yrs after the date of transfer.

(b) You do not sell this house within 3 yrs of purchase or construction

(c) This new house purchased or constructed must be situated in India

(d) You should not own more than 1 residential house (other than the new one) on the date of transfer

(e) You do not purchase within a period of 2 yrs after such date or construct within a period of 3 years after such date any residential house (other than the new one).

Also other ways are by putting it into capital gain scheme account you are allowed to deposit your gains in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. And in your return claim this as an exemption from your capital gains, you don’t have to pay tax on it.

Or you can purchase capital gains bonds.

I have calculated the capital gain if you sale in 15 lakh than capital gain would be around 4.50 thousand in your case.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

You bought the flat at 4.25 lakhs and are selling it at Rs 16 lakhs

2) the profits earned on selling flat would attract long term capital gains considering fact you held the flat for more than 2 years

3) it woukd not be capital loss

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

Hi, since it was purchased at a price of 4 lacs , so there is a property gain in the said transaction

Hemant Chaudhary
Advocate, Gurgaon
4619 Answers
67 Consultations

4.9 on 5.0

The capital gain is calculated on the basis of the indexed Property value on the current rate as your property bought in 2003 valued 4.23 lacs will be calculated on present index cost and the amount received from the sales less indexed cost will be your capital gain and you will have to pay long term capital gain tax on the profit amount are you can invest that amount for the saving of capital gain as per the procedure

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Any gains or losses arising from the sale of a capital asset are capital gains or capital losses. The gains are taxable in the year such transfer of asset takes place. And in the case of capital loss, the same can be carried forward for set-off against any future capital gains for a period of 8 years.

Assets which are held for more than 36 months are considered as capital asset. However from financial year (FY) 2017-18, the period of 36 months has been reduced to 24 months for immovable property (land, building and house property).

Some assets are considered as long term if they are held for more than 12 months, for example listed equity or preference shares, securities, units of UTI, equity-oriented mutual funds, and zero coupon bonds.

Ganesh Kadam
Advocate, Pune
12338 Answers
191 Consultations

4.9 on 5.0

1. Then problem from the I.Tax department will not be faced by you being the seller but by your buyer.

2. Your buyer will admittedly pay you Rs. 14 Lakhs when he is getting the property valued by the Government at Rs. 22 Lakhs.

3. So, the buyer will make a profit of Rs. 8 lakhs (Rs.22 L - Rs.14 L) in that financial year for which he shall have to pay I.Tax on his said additional income of Rs.8 lakhs.

Krishna Kishore Ganguly
Advocate, Kolkata
26614 Answers
726 Consultations

5.0 on 5.0

The profit what is likely i./e., the the difference between the purchase price and the selling price shall be profit or long term capital gains.

Exemption under section 54 of income tax act can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. This benefit is available only to an individual or HUF. The benefit can be claimed by purchasing or by constructing a residential house.

When on the transfer of a house property or land appurtenant thereto being taxable under the head ‘income from house property’ owned by an Individual and H. U.F. there occurs some capital gain and such capital gain is reinvested in

(a) Purchase of another residential house within one year before or two years after the sale of the house, or

(b) Construction of new residential house within three years after the sale of the house. The amount of capital gain so invested shall be exempted from tax.

A residential house property purchased or constructed by re-invested capital gain cannot be transferred within 3 years of its purchase or construction.

If the house so acquired by reinvesting capital gain is sold within a period of three years from the date of its purchase or construction, the previously exempted capital gain will be taxable along with the capital gain on the sale of such house, if any, in the current previous year. In the event of loss on sale of new house, it shall be adjusted out of old exempted capital gain [Section 54].

T Kalaiselvan
Advocate, Vellore
78131 Answers
1543 Consultations

5.0 on 5.0

Dear Client,

Profit will count LT-CG. Very low or minus.

Read Sec 54/54F of Income tax act.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

There has been a major shift in policy on setting off and carry forwarding the unabsorbed loss since April 1, 2002. Setting off loss from one source of income against another is allowed except in the case of capital gains. This is the law as it stands now:

1. Loss falling under heads of income other than 'Capital Gains' can be set off against income from any other source under the same head.

2. Short-term capital loss can be set off against any income under the head 'Capital Gains' i.e both short-term as well as long-term.

3. Long-term capital loss can be set off only against long-term capital gains.

Before this amendment long-term losses could be adjusted against short-tem capital gains thereby allowing a substantial tax saving.

Unabsorbed long-term loss can be carried forward for up to eight years and be used to set off unabsorbed loss in any of those years. Notably, long-term capital gains that arose before the amendment in the law last year are also affected by the change—in the future, even old losses cannot be used to set off short-term gains.

Prashant Nayak
Advocate, Mumbai
27289 Answers
88 Consultations

4.4 on 5.0

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