I sold a flat in 2013 and invested some amount in an under construction flat. What will be my tax liability?

Tax exemption under the Capital Gains Account Scheme, 1988 is transitory in nature. The interest earned is taxable as ‘Income from Other Sources’ at slab rates. The account holder has to invest the balance in the account within the stipulated peri...

Getty Images
To close the account, an application has to be made with the approval of the Assessing Officer.
I sold a flat in 2013 and invested a part of the proceeds in an under construction flat. The balance was deposited in a capital gains savings account to be used for the next instalment. However, the builder went bankrupt and the flat remains incomplete. The bank has frozen the capital gains savings account and stopped paying any interest on it. Should I withdraw the amount? If yes, what is the process and what will be the tax implications?
Prableen Bajpai Founder FinFix® Research & Analytics
replies: The tax exemption under the Capital Gains Account Scheme, 1988 is transitory in nature. The interest earned is taxable as ‘Income from Other Sources’ at slab rates. The account holder has to invest the balance in the account within the stipulated period. The time period in case of an under-construction property is 3 years. Since you invested but could not utilise the full amount within the defined period, your case falls in a grey area.

There have been instances in the past where tribunals and courts have favoured the depositor by allowing exemption to capital gains in cases where the builder has not completed the construction since the intention of the depositor was bona fide. However, if your appeal is not accepted, you will need to pay the applicable capital gains tax. To close the account, an application has to be made with the approval of the Assessing Officer. Post that, the deposit office shall pay the balance, including interest in the account of the depositor. You should consult a tax professional and pursue this further.

My father was allocated 25 equity shares (Rs 10 each) of Lipton Tea in 1977. The company later merged with HUL and my father received 200 shares of HUL (Rs 1 each). My father passed away in 1979. The court declared me legal heir in 2019. Now I wish to sell these shares with a market value of Rs 4.30 lakh. What will be the tax liability?
Amit Maheshwari Partner, AKM Global
replies: In case of listed shares held by the taxpayer for a period of more than 12 months, the gain will be treated as long-term (LTCG). In case of capital assets acquired through inheritance, the period in which the shares were held by the previous owner shall also be included for calculating the period of holding, hence the gains in your case would qualify as LTCG and the cost at which the previous owner acquired those assets shall be considered the cost of such assets. Further, where shares were originally acquired prior to 1 April 2001, the cost of the capital asset for the purpose of calculating LTCG shall be substituted with the fair market value (FMV) of the asset as on 1 April 2001. The LTCG arising on sale of listed shares is taxable to the extent such LTCG exceeds Rs 1 lakh in the given financial year and such gains shall be taxed at 10% (plus surcharge and cess). In your case the sale amount minus the purchase price (higher of the actual cost or FMV as on 1 April 2001) minus any transaction cost (excluding STT) shall be considered the gains out of which the gains exceeding Rs 1 Lakh shall be taxed accordingly.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
READ MORE
ADVERTISEMENT

READ MORE:

LOGIN & CLAIM

50 TIMESPOINTS

More from our Partners

Loading next story
Text Size:AAA
Success
This article has been saved

*

+