Your Taxes

I recently got a portion of a 50-year old house on the partition of my father’s HUF. I plan to sell the house. What will be the date of acquisition for calculating capital gain? What are the tax-saving investment avenues for the capital gains ?

Gulbir

When a capital asset becomes the property of an assessee on any distribution of assets on the total or partial partition of a HUF, the cost of acquisition shall be deemed to be the cost at which the previous owner of the property acquired it, as increased by the cost of any improvement incurred by the previous owner or the assessee, as the case may be. While computing the period of holding in such a case, the holding period of the previous owner is also considered. Since the house was held by your father’s HUF and you for a combined period of more than 36 months, the gain on sale of the same shall be treated as long-term capital gain (LTCG).

The LTCG arising from this transfer shall not be chargeable to tax if you purchase a residential house within a year before or two years after the date on which the transfer took place, or if you build a residential house within three years of the transfer date. The amount of the LTCG should be equal to, or less than, the cost of the new house; else, the exemption shall be reduced proportionately. If the new house property is sold within a period of three years, its cost will be reduced by the capital gains so exempt for computing the capital gain at the time of sale of new house property. You can also claim exemption by investing in capital gains bonds redeemable after three years and issued by the National Highways Authority of India or by the Rural Electrification Corporation Ltd. You can invest up to a maximum of ₹50 lakh and claim the exemption accordingly.

I surrendered the following policies in September 2014: ICICI Pru Life Time Maxima and ICICI Pru Life Stage Pension PolicyDeduction on account of EPF and additional PF itself has exceeded ₹100,000. in all the years. What is the tax implication on surrender?

HD Maheswari

Where any amount standing to the credit of the assessee in a pension fund, in respect of which a deduction has been claimed under the Income-Tax Act, together with the interest or bonus accrued/credited to the assessee’s account, is received by the assessee on account of surrender, the whole of such amount shall be deemed to be the income of the assessee and shall accordingly be chargeable to tax.

Assuming that your total investment on account of EPF and PF, eligible for deduction under 80C of the Income-Tax Act was ₹100,000 for all the years and you did not claim deduction for investment on the said plans, the principal sum received by you on surrendering the same shall not be taxed. Any amount received over and above the principal amount shall be taxable in your hands.

The writer is a practising chartered accountant. Readers may mail their queries to >taxtalk@thehindu.co.in

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