Your Requests – Income Tax: The capital gain on the sale of an inherited property is subject to income tax

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For debt mutual funds, capital gains will only be qualified as long-term if they are held for longer than 36 months, otherwise they will be assimilated in the short term.

By Chirag Nangia

After the death of my father, I sell his apartment. Are the proceeds from the sale exempt from income tax? I have no other source of income.
– Mahesh Samarth
Although no income tax arises on the inheritance of property upon the death of the father, the subsequent sale is taxable as “capital gains” in the hands of the beneficiary. Therefore, you must offer the capital gains on the sale of inherited real estate, whether or not you have other income. A building such as an apartment is classified as a long-term fixed asset if it is held for a period longer than 24 months. Otherwise the same is treated as short term. In calculating the holding period, the period during which your father held the property would be included.

In addition, gains resulting from the transfer of real estate held as long-term fixed assets are subject to tax at the rate of 20%. Short-term capital gains attract the normal tax rate based on the total taxable income of the taxpayer. In order to calculate the capital gains, the indexed acquisition cost, the indexed improvement cost and the expenses (incurred in full and exclusively within the framework of the sale) must be deducted from the sale price.

These capital gains are exempt in your hands if you reinvest them in another residential building in the year preceding or in the two years following the date of the transfer. In the event of the construction of a new dwelling house, the period is three years.

How long should listed debt UCITS be held to ensure that profits are treated as long-term capital gains?
—Dinesh Goyal
For debt mutual funds, capital gains will only be qualified as long-term if they are held for longer than 36 months, otherwise they will be assimilated in the short term.

I have a business / professional income of Rs 12.50 lakh. Short term capital gain is Rs 2.65 lakh, long term capital loss is Rs 3.50 lakh, dividend income Rs 0.50 lakh, interest on term deposit scheme for elderly Rs 1.32 lakh. Please indicate which ITR form should be completed?
—GSVS Prabhakara Rao
People who derive income from a business / profession, capital gains and other sources are required to provide the tax return in RTI 3.

The writer is director, Nangia Andersen India. Send your questions to [email protected]

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