Ask Us: on investments

I am in the process of selling my old house by the month-end. I propose to buy a new flat which has been launched recently with this sale amount and my savings, along with loan amount to be borrowed by my brother. The payment will be made in instalments from now onwards. However the agreement for sale, construction, etc, will be done next month itself and almost the entire amount from the sale of old house will be paid in one year. Rest will be managed with loan and savings. The construction is proposed to be completed by Jan 2027 and possession will be in Jan 2027.

Please clarify: Whether I can claim capital gains exemption? What is the cut off date for Long Term capital gains purpose? Whether I can claim capital gains exemption as my old house was held for more than 10 years .and the date of reckoning for capital gains exemption?

R. Bhasakaran

Long Term Capital Gains Exemption can be claimed under Section 54 of the Income Tax Act, 1961 in case the period of holding is more than 2 years. In your case, as the period of holding is more than 10 years, on the sale of this residential property, the capital gains thus arising will be long-term capital gains, enabling you to opt for exemption under Section 54 of the Income Tax Act, 1961. By the date of reckoning, if you mean the date of capital gains trigger, then it is the date of sale of this residential property. It is to be noted that you have to purchase or construct the new residential property within 2 or 3 years respectively from the date of sale of the current residential property in order to avail this exemption, as you are looking to purchase an under-construction property, you are to ensure that the possession/registration takes place within 3 years. Further, in order to avail of exemption, you are to transfer the proceeds from the sale of the current residential property into a “Capital Gains Deposit Scheme” if you are not in a position to invest the entire portion of the Long Term Capital Gains before you file your ITR for the next assessment year (i.e. before July 2024).

I had invested in the National Savings Scheme,1987 (since discontinued). What is the tax liability if I want to close the account and withdraw the entire deposit now?

N.R. Krishnaswami

Under Section 80CCA of the Income Tax Act, 1961, any amount standing to the credit of the assessee under the scheme as notified by the Central Government (which includes National Savings Scheme) in respect of which a deduction has been allowed, together with the interest accrued on such amount, is withdrawn in whole or part in any previous year, shall be chargeable to tax under “Income from Other Sources”. TDS will also be deducted under Section 194EE of the Income Tax Act, 1961 as applicable.

When a PPF holder passes away and the nominee gets the whole amount in the PPF account, does s/he have to treat the amount as that year’s income and pay Income Tax on it? Is there any method by which tax liability can be brought down and planned better for the nominee?

I am a regular reader of moneywise and look forward to seeing your clarification.

Gayatri Chandrasekhar

When a PPF holder passes away, the amount received by the legal heir/ nominee is exempt from tax under Section 10 of the Income Tax Act, 1961.

(The writer is partner, GSS and Associates, Chartered Accountants, Chennai)

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