I sold my house last year. I had owned it for 11 years. I am not planning to buy another house. What will be the tax incidence? How do I save tax on the capital gains accrued?
Since you sold the house after holding it for more than three years, this will result in long-term capital gain (LTCG) tax. LTCG is ordinarily taxable at the rate of 20.6 per cent.
LTCG tax is calculated as under:
Full Value of Sale Consideration*
Less: Indexed Cost of acquisition of house
Less: Indexed cost of improvement
Less: Expenditure exclusively related to transfer
*Where the sale consideration is less than the value of the property adopted by the stamp duty valuation authority, the latter value will be considered as the full value of consideration while computing capital gains.
As you are not intending to buy another house to save tax, you can invest the taxable LTCG in “specified assets”, that is, any bond issued by National Highway Authority of India or Rural Electrification Corporation. In case your investment in such specified bonds is less than the taxable LTCG, the capital gain to the extent invested will be exempted. The maximum amount you can invest in such specified bonds is Rs 50 lakh. The investment should be made within six months of the transfer of the property.
I am getting divorced. My wife and I had bought a house taking a joint loan (50-50). How will the taxation work if one of us takes the entire liability?
It is presumed that your wife continues to be 50 per cent owner of the property. It may be noted that to claim interest deduction against housing loan, the fundamental requirement is that a person should own that property. Hence, if you or your estranged wife decides to take up the entire loan liability without full ownership of the house, then, one of you may not be able to claim interest deduction on the portion of loan which does not correspond to the ownership of the house. Similarly, Section 80C deduction may not be available on repayment of the loan pertaining to the share of the house owned by the other estranged spouse.
I am a salaried individual. I sold some mutual fund units at a loss last year. I had held these for around five months. Can I set off the loss against short-term capital gains I have made this year?
Assuming that the dividend or bonus stripping provisions of Section 94(7) & 94(8) of the Income Tax Act were not applicable and the return of income was filed in time, that is, on or before July 31, 2009. Accordingly, you can set off the short-term capital loss incurred last year on sale of mutual fund units against the short-term capital gain during the current year.
Homi Mistry is tax partner, Deloitte, Haskins and Sells. Views expressed here are his own.
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