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STCG on flats is taxed at slab rates.
Early EPF withdrawal can trigger tax.
Property gains may qualify for exemptions.
I sold a flat this year which I had purchased a year ago. Can I pay short-term capital gains (STCG) tax of 20 flat on the gains instead of adding it to my regular income as I fall in the 30 per cent slab rate? Can I calculate the capital gains after deducting indexed cost using cost inflation index?
Since you have sold the flat before completing 24 months, the profits are to be taxed as STCG. The benefit of a flat rate of 20 per cent is available only for STCG on listed equity shares and units of equity-oriented schemes of mutual funds on which securities transaction tax (STT) has been paid.
STCG on all other capital assets are treated like regular income and are required to be added to your regular income and taxed at the slab rate applicable to you. In your case as the capital gains arose on sale of assets other than listed shares or units of equity-oriented mutual fund schemes, you will have to pay the tax at the slab rate applicable to your income.
The benefit of indexation is almost removed and is available only for computing tax liability for a resident individual and Hindu Undivided Family (HUF) for land and building acquired prior to July 23, 2024. As profits on sale of your flat are short-term capital in nature, you will not get the benefit of indexation either.
After completing four years and four months in employment I have decided to do something of my own. I understand that for the withdrawal of Employees’ Provident Fund (EPF) balance to be tax exempt, one has to complete five years of service. Is there any option, such as a declaration form that I can fill to get tax benefits as I am no longer looking for a job? Or will I have to pay tax on the withdrawal?
Under income tax laws, withdrawal of money accumulated in your Provident Fund account becomes taxable if you have not completed five years of service and contributions for at least five years have not been made in the said PF account. The withdrawal before the stipulated period of five years is exempt only in very exceptional circumstances, such as termination of the employee’s job due to ill health, or closure or discontinuance of the business of the employer or any reason beyond the control of the employee.
As your case is not covered under these exceptions and since you have not completed five years, whatever money you withdraw along with the interest will become taxable in your hand. Moreover, in case the aggregate amount exceeds Rs. 50,000, tax at the rate of 10 per cent shall be deducted by the PF authorities or PF trust.
The employer’s contribution will become taxable under the head “Salaries” whereas the interest accumulated and your contribution will be taxed under the head “Income from other Sources”. If there is no other income, you will be able to claim standard deduction against the income becoming taxable under the head “Salaries”.
My father had inherited a piece of land from my grandfather around 25 years ago and now wants to sell it for around Rs 2 crore. If he decides to put this money in his savings account will that attract tax? What is the best way for him to distribute this money among his children?
Since your father has inherited the land, the cost for computing the capital gains shall be taken as the cost for which the previous owner had purchased it. Since your grandfather had bought this land, the cost paid by your grandfather will be taken as your father`s cost. Since the property was bought before April 1, 2001, your father can take the fair market value (not higher than stamp duty value) as on April 1, 2001 as his cost of acquisition. Since the property was acquired before July 23, 2024 and presuming that your father is a resident, he has two options. Either he can pay tax at 12.50 per cent on the difference between the cost adopted and the sale price, or apply indexation on such fair market value and pay tax at 20 on the difference between indexed cost and the sale price.
He can save capital gains by investing the sale proceeds in a residential house and/or in capital gains bonds within specified time limits.
He can deposit the money in his savings account as well as distribute the money among his children after paying tax.
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The author is a tax and investment expert and can be reached at jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
