By Chirag Nangia
My father passed away last year and our home is in my mother’s name. She gets a family pension. What are the tax implications if we sell the home?
—Arun Arora
If the home was cumulatively held by your parents for a period more than 24 months, the capital gains on sale of home shall be classified as extended-term (LTCG), else, the identical shall be quick-Term in nature (STCG). For computing LTCG, the indexed price of acquisition, indexed price of improvement and expenditures (incurred wholly and exclusively in connection with the transfer) shall have to be deducted from the sale consideration of home. Notably,
due to the fact the home has been acquired by way of inheritance or succession, the ‘cost of acquisition’ shall be deemed to be the price at which the earlier owner (your father) acquired it. LTCG so computed shall be taxed at the price of 20%.
Further, tax exemption is obtainable if LTCG on sale of home is re-invested in a different residential home. One has to acquire it inside two years from the date of transfer. In case of building, the timeline is 3 years. Further, the section does not restrict re-investment in the name of the seller only. This position has been affirmed in numerous courts and tribunals as nicely. Then, your mother can claim added benefits beneath Section 54. You may well seek qualified aid for appropriate computation and reporting of earnings.
l I have salary earnings of much less than `50 lakh and earnings from taxable RBI bonds, LTCG from FMPs & dividend earnings from mutual fund, other interest earnings from PPF/FD. My wife has salary earnings much less than `10 lakh plus earnings from taxable RBI bonds and dividend earnings. Which ITR must we use?
—M K Jain
Both of you shall have to disclose the particulars of earnings in ITR 2. Income from specified units of a mutual fund is topic to 10% TDS, as per Section 194K. Notably, TDS is a type of advance tax paid to the government, the credit of which can be taken even though discharging the final tax liability (computed at applicable slab prices/ specific prices). While filing the return of earnings, you shall have to self-assess your tax final liability by applying applicable slab prices/ specific prices (as the case may well be) to your total earnings and deduct the quantity of TDS therefrom.
The writer is director, Nangia Andersen India. Send your queries to