Where do I put the LTCG amount to save income tax?
About three weeks is now left to file an income tax return. In this case many people who earn profits from property broking want to know the tax rules associated with it. They are also struggling to calculate the benefits of indexation at the purchase price of the property. We can understand the tax on how much people earn from the purchase and sale of the property, by a question-answer.
The question is - I am a retired tax payer of 64 years. I bought a flat with wife, joint name, which I now want to sell.
How long will the calculation of long-term capital gains on flat purchased 24 years ago? Also tell about the option of tax saving. Marketing head of PPFAS Mutual Fund and certified financial planner Jayant R. Pai answered this.
Pai said, "Even if you bought flat 24 years ago, long term capital gains (LTCG) will be considered as base year 2001-02." Pai said that if you sell flat in the current financial year, then the price of your purchase will be 2.8 times its price.
You will have to pay tax in the next financial year. For instance, if you bought the flat for Rs 10 lakh, then now it will be priced at Rs 28 lakh according to the inflation rate.
You will have to pay tax at 20.8% on this profit. If the flat is in joint name then both of you will have to pay tax on the profits from its sale according to their shareholding. If you want to save tax on profitability on the sale of property, then you can put up to Rs 50 lakh in the capital gain bond of National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC).
If you want, you can invest this money in the purchase of residential property within two years with this amount of profit. If you are building a new house and want to save tax on this amount of profits, you can invest this amount in it even after completing construction within three years.
What is Long Term Capital Gains (LTCG) tax?
If you invest in a property or other option to make profits and sell it after three years or more then the profit from this is called Long Term Capital Gains. In simple terms, this is the profit from sustaining the investment for a longer period.
The tax which the government charges on this profit is called LTCG tax. In LTCG you get the benefit of indexing. At different options of investment, however, the time limit for calculating LTCG is different. In case of investing in shares, LTCG is applicable after one year, then it is three years for the property.