S.C. Vasudeva
Q.I had bought 40 marla agricultural land in 2007. Crops are being sown in it till date and it is surrounded by agricultural land. This area, though rural, falls in the municipal limit of our town. Now I want to sell a 10 marla plot from this. What are the requirements? Do I need to obtain an NOC from the municipal committee? Am I required to pay any fee to municipal committee? — Manjit Singh
A. You do not have to seek any no objection certificate from the municipal committee for selling the agricultural land provided the same would be used for agricultural purposes by the buyer. However, as the agricultural land is situated within the municipal limits, you would be liable to pay tax on the capital gain arising on sale thereof. The agricultural land having been held for more than three years, gain arising on sale thereof will be treated as a long-term capital gain. Such a gain is chargeable to tax @20 per cent plus education cess of 3 per cent thereon. It may be added that in case capital gain arising on the sale of the agricultural land which was being used two years immediately preceding the date on which the sale took place by an assessee being an individual for agricultural purposes and the assessee has within a period of two years after that date purchased any other land for agricultural purposes by utilising the amount of such long-term capital gain, then, the tax on the capital gain arising on the sale of agricultural land would not be chargeable to tax.
Property & partnership issues
Q.If a property is in partnership name and partners want to dissolve the partrnership, then do they have to pay tax? Can a partner transfer property bought after dissolution of firm to one of her sons? Is there any tax liability in this case? — Vishal Shukla
A .According to the provisions of Sub-Section (4) of Section 45 of the Act, any transfer of the capital asset by way of distribution of capital asset on the dissolution of a firm is chargeable to tax as the income of the firm for the assessment year in which such a transfer took place and the fair market value of the asset so distributed as on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of such transfer. Therefore, in case an immovable property which has been held by the partnership firm is allocated to any of the partners by virtue of dissolution of the firm, the firm would be liable to pay tax on the capital gain which would be computed notionally by taking into account the fair market value of the property so allocated less the indexed cost of such property. The partner who has received property on distribution of assets on account of dissolution would not be liable to pay any tax. The property so allocated to a partner can be gifted by her to her son. However, such a gift would attract stamp duty on the market value of the property which will have to be paid at the time of registration of the gift deed.
How much tax do I need to pay?
Q .I had purchased a residential plot of 150 sq. yd for Rs30,000 in 1998 at Zirakpur (Mohali). Out of this I sold 100 sq. yd in 2001 for Rs1,00,000 and then on balance area of 50 sq. yd I had built a shop in 2006. The construction cost was Rs 5 lakh. The map of the shop had been approved by Municipal Committee. Now if this shop is sold for Rs 10 lakh then how much income tax will have to be paid? What are the options to save the tax on sale? — G.K. Arora
A. On the basis of the facts given in the query cost of 50 sq yd of area purchased in 1998 would work out at Rs 10,000. The indexed cost thereof would be Rs 29,174. The indexed cost of the shop would work out at Rs 9,86,513 taking into account the cost of Rs 5 lakh which is stated to have been incurred in 2006 towards the construction of the shop. There would thus be a capital loss of Rs15,687 taking into account the sale price of Rs 10 lakh. No income-tax would thus be payable in respect of the transaction. It may be added that the computations have been made on the presumption that the sale would take place in 2014-15, as the cost inflation index has been applied on that basis.
Property not got registered by the builder
Q.We agreed to purchase flats from a private builder, who handed over the possession to the buyers against the final installment, according to the agreement. But he passed away before getting the completion certificate and the registration of the flats against the name of the respective buyers. After his death his wife became the sole proprietor of his properties. She went to the USA to live with her son. There is a little possibility of her coming back to India in the near future.
Kindly suggest some way to get the flats registered in my name to avoid any legal problems in future.
Please also tell me if I have to pay the registration along with penalty at the circular rates prevalent on the date of possession or at the rates at the time of registration. The rate of penalty, if any may kindly be intimated. — R.K. Kapila
A. Your queries are replied hereunder:
- You have no other option but to approach the court for directing the legal heir(s) of the builder to get the property registered in your favour as also to complete the formalities with regard to obtaining of the completion certificate.
- The stamp duty and the registration charges will have to be paid on the basis of the circle rate prevailing as on the date of registration. You may try your luck by filing a petition with the court for directing the Collector of Stamps to charge stamp duty, on the basis of the circle rate prevailing as on the date of handing over the possession of the flat.
- No penalty should be levied for delay in getting the registration effected as the delay is not attributable to you
Can I claim rebate onHRA and HBA?
Q .I am a Haryana government employee. I took Rs7 lakh house building advance (HBA) from my department to construct a house at my native village. The house is now occupied by my parents, while I live in a rented house at the place of my posting. I want to know whether I can claim rebate for both HRA and HBA interest. If yes, then up to what extent and while e-filing ITR against which column can I show my HRA and HBA interest rebate. My gross salary is more than Rs 5 lakh getting HRA around Rs23,000. Please clarify. — Satish kumar
A.Your queries are replied hereunder:
You are entitled to claim house rent allowance even though your own a house which is occupied by your parents. Section 10 (13A) of the Income Tax Act, 1961 (The Act) read with Rule 2A of Income Tax Rules 1962 (The Rules) provides that least of the following amounts is not to be included in the salary of an assessee if an assessee is in receipt of HRA.
(i) The actual amount of HRA received by the assessee in respect of the period for which the salary is taxable;
(ii) The amount of expenditure actually incurred by the assessee towards the payment of rent in respect of residential accommodation occupied by him which exceeds 1/10th of the amount of salary due to him for the relevant period;
(iii) An amount equal to:
(a) where such accommodation is situated at Mumbai, Kolkata, Delhi and Chennai, one half of the salary due to the assessee in respect of the relevant period;
(b) where such accommodation is situated at any other place, 2/5th of the amount of salary due to the assessee in respect of the relevant period.
It is not possible to compute the allowable deduction as you have not indicated the place where the rented accommodation is situated.
- You are also entitled to claim deduction for the amount paid towards the repayment of installment of the principal amount of loan borrowed for the purposes of construction of a house. The deduction is admissible according to the provisions of Section 80C of the Act within the overall limit of Rs 1,50,000. You would also be entitled to claim a deduction in respect of interest on borrowed amount against income from house property in accordance with the provisions of Section 24 of the Act.
- In case you file your return in ITR-1, the employer will reflect the allowable deduction in form 16A issued by him. The net income from salary will be reflected in Column B1. In case you file return in ITR-2, the relevant schedule for details of salaries would be Schedule S. Claim for deduction in respect of interest on house building loan should be made in Schedule HP. Deduction for claim under Section 80C of the Act should be made in Schedule VIA.
