My father,a senior citizen ,is selling his flat after 20 years. What capital gains tax and how can he save it.

Question

Are there any special rebates for senior citizens . How would his capital gains be computed. How can he save these taxes

Answer 1

I am also a seniour citizen. My investment is in property only. My strong advise is not to sell the flat unless you are badly in need of money. The value of properties are going up and up daily. If you sell now, you cannot buy it again. Selling property and paying capital gains is all waste.

If you have to sell your property, and if you happend to pay tax, to avoid paying tax he has to invest the profit in capital gain bonds. If your father has no other income, then you can deduct Rs.1.85 lakhs from the profit. Say indexation profit is 3 lakhs. less 1.85 lakhs rebate to >65 years old people. Your net profit on which you have to pay tax @20% is Rs.1.15 lakhs.)

What Mr.Rupin sain in his above answer is partly not correct. For the purpose of Long Term Capital Gains on Property, you have to go indexation only and no other methos. (The other method of 10% is only for mutual fund units.) Mr.Rupin said two methods. No two methods. Only one method for property that is indexation and 20% tax.

I have given the below answer to a question about long term capital gains of a property. Follow this. This will give you how to calculate the tax. About 20 years back say during 1985-86 the indexation was 133. For 2005-06 it is 497.

Cost if Indexation is only for the purpose of calculating Long Term Capital Gains. Listed/shares sold in Indian Stock Exchanges are free from payment of Tax, if they are sold after 12 months of purchase. Other properties will be treated as Long Term Cap. Gains if they were sold after 36 months. For this, the indexation cost will apply and the income tax on this income is @20% flat rate.

Example:
On 17.9.1982 your have purchased a house plot for Rs.10,000/-. That is in the FY:1982-1983. The Cost of inflation index for that year was 109;

On 16-11-2005 you have sold the same for Rs.8,00,000. The financial year is 05-06 and the inflation index for that year was 497.

Your actual gain is (8,00,000-10,000) Rs.7,90,000/-

Your actual cost of the house site is Rs.10,000

Your inflation indexation cost is 10,000 x 497/109= Rs.45,596/-

Your inflation indexation gain is Rs.8,00,000-45,596= Rs.7,54,404.

The tax on it will be Rs.1,50,881+ED2%.

If you need any personal clariication (free advise), please send me a mail to my mail address [e-mail]

Answer 2

There are no special rate of rebates for the senior citizen in case of a capital gains then U must put the indexation the indexation method is
Purchase value 20Years back multiplied by the current Year Indexation Rate of 497 divide the whole by the base year Index value i.e., thge Year of Purchase or Built I am not sure about the indexing rate on the day For the year 1985-1986 Please reffer to the income tax website then reduced the value of the sale if it was more then U have the capital gains IF it was less then U have No capital gains. I am also a C.A. Inter U can contact me on friend [e-mail] for further calssification
THE indexing and Non Indexing was available only for the zero coupon bonds and the mutual funds
Please invest the amount of capital gain if any in the long term capital Bond or in the Capital asset itself the total sale amount should be invested in both the cases are else U have to pay the tax on long term capital gain @ the flat rate of 20% THe capital gain will be calculated on the proportionate basis of the amount not invested by U to the total sale proceeds.

Answer 3

There is no special rebate , but the exemption limit is higher in case of senior citizen.

Follow this followoing principal for saving tax on long term capital gains . Since the flat is 20 years old, you can compute the indexation in following manner

cost of flat x 497/ 133.

See if the 20 % of tax on it is more than 10 % on (Sale value - cost price), opt for without indexation.

If your father wants to save the capital gains tax on the amount, he can use the amount of capital gains either for purchaing a new flat within one year befire or 2 years after or constructing falt within 3 years or keeping the money in any specified assets within six months .the relevant provison are 54 and 54F of the I T Act.

Answer 4

Dear friend

I was tax practicioner and got settled in HK since two years but i will answer your question :

1) Senior citizen is eligible for 20000/- tax rebate u/s 88

2) Since the property witheld is more than 3 years it is classified as Long term capital gain.

2) Your father can opt for either of the one investments as follows :
a) Invest the profit element to purchase another flat within 6mth.
b) -- do -- for any other property.
c) Open bank account under 'INVESTMENT FOR CAPITAL GAINS HEAD' and invest in fixed deposit for 3 years.
Purchase another flat / property.

Thanks and regards

Answer 5

Since he is selling a flat after 20 years he will be subject to LOng term capital gains tax.

You can choose the method of taxation i.e. With Indexation or without it. the method basically takes inflation into account while computing your tax liability.

Answer 6

If the taxable amount is reinvested in another property or in nabard capital gains bonds , he can escape the capital gains tax net. there are no special provisions for senior citizens

Answer 7

If she's had the land for extra desirable than a year, her tax fee on the LTCG is at maximum 15%. if she has different earnings, say, social protection, the useful tax fee could be closer to 17%. (If she generally has little or no earnings, SS reward won't have been taxed. This year, 80 5% of the advantages may well be extra to her taxable earnings.) Being previous does no longer exempt you from paying earnings tax.

Answer 8

It's unclear and there are basically several potential answers to this question