Income Tax 2009 Deductions
July 8th, 2010
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Question: Computing Capital Gain Tax?
I purchased a flat in June 2004 for INR 15.75 lakhs and sold this for INR 35 lakhs in July 2009.
(1). How do calculate capital tax. (2). Can I claim deductions for interest paid on housing loans for last 5 years, which we did not claim earlier because no assesment was filed by us – both did not have PAN card then and both are NRI + payment for loan installment was thru NRE a/c. (3). This was a Joint purchase with my wife so, can we both claim income tax deduction eligibilty – we both do not have any income in India. (4). Can I show increase on cost on purchase by adding the cost of transfer and repairs etc. (5) How do I calcaluate inflation factor (6) Is there any way I can avoid taxation thru some way for eg. reinvesting some where or under some income tax section.
Reply and help on this would be most appreciated.
Answer: 1. Cost inflation index for 2004 2005 was 480. For 2009-2010, it has not yet been published. Let this be x.
2. Your indexed cost of the property will be 15,75,000 multiplied by x and divided by 480. The resultant figure will be your cost now for tax purposes.
3. 35 lakhs minus indexed cost (as per 2) will be the Long Term Capital Gain. Your tax will be 20.60% of this amount.
4. As you are a non resident in India living abroad, that country has the right to tax capital gains. (Depends on the DTAA between that country and India.) However, Indian Capital Gains Tax is payable.
5. Any improved done to the property that enhanced its value can be added to the cost and benefit of indexation taken.
6. Interest paid on loans availed can be added to the cost of the flat and indexed again.
7. If you do all this, you will find that the gain has come down substantially. Pay 20.60% tax on this and forget it.
8. You will (usually) get benefit of reduction of your overseas income tax for the tax paid in India. However, if you live in a country where no incometax is levied, then, there will be no benefit.
9. You and your wife can claim tax benefits declaring your ratio of holding interest in this property. That is legal and permissible.
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