The Hindu Business Line : A pensioner who wants to save on tax

You don't have to worry about any tax liability on your monthly pension as the annual aggregate thereof is well within the tax-free limit of Rs 50,000.

As for the one-off capital gains, well let us quantify it first. Since you had held it for more than 36 months it has qualified to be treated as a long-term capital asset.

The long term capital gain (LTCG) is 3,60,000 minus the indexed cost, that is, 40,000 divided by the cost inflation index of 223 for 1992-93 (notified) and multiplied by 447, the cost inflation index notified for 2002-2003 which works out to Rs 80,179. In other words, thanks to the indexing formula you have benefited to the extent of 100 per cent of the actual cost.

Your LTCG, therefore, is Rs 3,60,000 minus Rs 80,179, that is 2,79,821. Now you have the following options:

invest the LTCG in another house by buying a house within two years or constructing a house within three years from the date of transfer of the house you have just sold; or

invest the LTCG in a three-year bond of NHAI or the NABARD or Rural Electrification Corporation Ltd;

If you don't want to get into the hassle of buying or constructing a house, I suggest you avail yourself of the second option.

You have to invest in these bonds within six months from the date of sale of the house.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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