Capital Gains On Sale Of Land: Exemption Only On LTCG, STCG Will Be Taxed At Slab Rate
You can take tax benefit on LTCG on land sale under sections 54F and 54EC of the Income-tax Act by either investing in a house or in capital gains bonds. Deduction under Section 80C is not available on a top-up home loan if used for repair. Tax benefit not available on child’s overseas education
I own a residential plot which I want to sell now. How can I save capital gains tax on the gains made from the sale proceeds of the plot?
One can claim exemption only in respect of long-term capital gains (LTCG). The profits made on sale of a plot of land are treated as LTCG if the same was held for more than 24 months. The profits made on sale of a plot of land held for 24months or less are treated as short-term capital gains (STCG) and will be included in your regular income and taxed at the applicable slab rate.
You have two options to save your tax if the residential plot was held for more than 24 months. Under the first option available under Section 54F of the Income-tax Act, 1961, you will get exemption if you invest the net sale consideration received from sale of the residential plot for acquiring a residential house.
In case you do not invest the full sale consideration, only proportionate exemption will be available. You have to acquire a residential house within two years from the date of sale. You can still claim the exemption if you have already bought a residential house within one year before the date of sale of the plot. In case you opt for self-construction or book an under-construction residential property, you can still claim the exemption provided the construction of the house gets completed within three years from the date of sale of the plot.
The money not utilised by the due date of filing of the income tax return (ITR) has to be deposited in a capital gains account under Capital Gains Account Scheme with a bank by the due date of filing of the ITR. You can use the money so deposited for the purchase or construction of the house. In case you already own more than one house on the date of sale of the plot of land other than the one in respect of which exemption is being claimed, you can avail exemption under Section 54F.
Under the second option available to you under Section 54EC, you have to invest only the capital gains in bonds of specified financial institutions within six months from date of sale of the plot.
Do note that you can invest a maximum of Rs. 50 lakh in these bonds during one financial year as well as for claiming exemption in respect of one year. The period of six months can even go beyond your due date of filing of your ITR. You are not required to deposit the unutilised money in a capital gains deposit account. Please note that since the benefit of indexation is no longer available you have to invest your LTCG in these bonds.
I have a running home loan from ICICI Bank for the house where I stay. I have been availing myself of the tax benefit on both the principle and the interest up to Rs. 1.20 lakh annually. If I take a top-up loan for repair and alteration, can I claim any income tax benefit on the top-up loan, too?
If the loan is used for repair, renewal or reconstruction of the house, the interest on such loan is eligible for deduction under Section 24(b), but the deduction under Section 80C for repayment of this portion of loan taken for repairs and alteration is not available.
Since you are staying in the same house, the total deduction in respect of interest on both the loan as well as for buying the house and other for repair and alteration shall be restricted to only up to Rs. 2 lakh provided you opt for the old tax regime. If you opt for the new tax regime, you will not be able to claim any tax benefit for the entire loan since the house is self-occupied.
I have paid a college fee of Rs 2 lakh for my son, who is studying abroad. My employer is not ready to give me any tax benefit while deducting tax at source (TDS) from my salary on this. How can I claim any benefit on this?
Deduction under Section 80C which is available only under the old tax regime allows an individual to claim deduction for tuition fee paid to any college, school, university or educational institution situated in India for a full time course. The maximum deduction which can be claimed is restricted to Rs. 1.50 lakh together with other eligible items.
Since the college in respect of which you have paid the fee is situated outside India, no deduction is admissible under Section 80C and your employer is justified in refusing you the benefit of deduction under the said section.