IT Café Online

I sold my property - a site and a house built on it - in a BDA layout for Rs 70 lakhs in June 2008 and purchased a property - a site and a very old house on it (ground floor built in 1978 and first floor built in 1990) - in another BDA layout for Rs 50 lakhs in the same month - June 2008, through a registered sale deed. Since the house was very old I spent Rs 6 lakhs on repairs and improvements. Out of the sale proceeds of Rs 70 lakhs, I spent about Rs 5 lakhs on stamp duty and registration of the property I purchased. I want to give Rs 5 lakhs to my wife who has applied to buy a small site at Bangalore by paying an initial deposit only. What is my capital gains tax liability? How I can save on my capital gains tax liability? What is the period within which and the mode by which I should invest to save on tax liability?

Assuming the old house in the BDA layout was held for more than three years as on date of sale, you would be entitled to a deduction under Section 54 to the extent of Rs 61 lakhs from the capital gains (i.e. net sale consideration minus the indexed cost of acquisition). Rs 5 lakhs paid to your wife would be irrelevant to the present matter of tax planning. One should buy a residential property one year before or two years after, or construct within three years, from the date of sale of the residential property on which capital gains exemption is to be availed. For this, there are other conditions which also need to be fulfilled as prescribed under Section 54 of the Income Tax Act.

My father has left a Will in which he has bequeathed a house and some investments in bank deposits in my name as a first holder and in my mother's name as a second holder, also stating that after my mother's death I will be the sole inheritor of both properties. I am an income tax assessee, but my mother is not an assessee. As my mother is over 70, I would like to declare to the Income Tax Department that I include both properties as part of my possessions and bear the tax incidence completely. This would save her the bother of having to fulfill tax-related formalities. I also wish to avoid any clubbing of income. Is this permissible as per the income tax rules?

Since you are the first holder and a major, you could show the entire investments and properties in your books. However, to the extent your mother has income rights over these assets, they need to be shown only in your mother's books. As otherwise she would be subjected to taxation to the extent of her share of income. Clubbing provisions cannot be applied in this case since both are majors and would be subjected to taxation separately.

I purchased a site with a bank loan. I will be retiring this year by which time the loan also gets repaid. The bank is prepared to lend to me for a house construction also, but I do not want to avail this loan as I am not sure of repayment. My son is employed and is otherwise entitled to borrow. He will be the ultimate owner of the house I intend to build. Can my son avail tax benefits on the housing loan borrowed and EMIs remitted since the site is in my name? If not, please suggest a suitable deed by which he will be able to avail the tax benefits and also automatically succeed to the property after my lifetime. He is my only son, daughter married already.

You need to first gift transfer the site to your major son (even half undivided portion would suffice). Then he could construct the residential house thereon with a bank loan. The interest paid towards the bank loan in such a case would be entitled to a deduction out of your son's income. Also, the loan repayment would be deductible under Section 80C (subject to limits).

I booked a flat under construction in July 2004. The construction started in May 2005 with a three-year clause for completion i.e. in May 2008. However, till date the construction is not completed and registration is expected in the next two months. Now, if I sell the flat, will I be liable to pay long-term or short-term capital gains tax? The three year lock-in period for capital gains is taken from which date?

The sale would be a short term capital gain and taxed accordingly. The three-year period would be from the date you are owning the residential flat and not the date of your booking it.

Specify the figures of VAT applicable on these construction materials used in the construction of apartment complexes. a) Cement and cement blocks b) Steel rods c) Bricks d) Wood for door and window frames. Also, are there different VAT rates for apartments and for stand-alone houses?

KVAT contains six schedules and items like cement and other construction materials including bricks, timber, wood, glass, mirror, roofing materials etc are contained in the Fifth Schedule.

The provision under which these goods are taxed is Section 11(3) which deals with 'Input Tax restrictions'. Construction activities are covered under 'Works Contract' as defined under Section 2 (37) of the KVAT Act. Any activity which amounts to a 'works contract' is taxed at the rate of 12.5 percent under Sl. No. 23 of the Sixth Schedule to the KVAT Act. Iron and steel are among items declared goods under Sl. No. 30 of the Third Schedule to the KVAT Act. ...