In case you are looking to save your long term capital gains, National Highways Authority of India (NHAI) has come up with its fresh issue of Capital Gains Bonds (Series XIV) of Rs 4,000 crores.
Any individual, Hindu Undivided Family (HUF), or non-resident Indians (NRIs) can invest in these NHAI capital gains bonds. The amount invested should be the long term capital gains made by selling residential property held for more than three years or more.
The long term capital gains on sale of residential property (held for more than 3 years) are taxed at 20% with indexation. You would need to invest the long term capital gains made within 6 months of date of sale of the property.
We explain this by an example:
You bought a house in April 2007 for Rs 50 Lakhs and sold it on April 2011 for Rs 1 Crore. This is how the capital gains would be calculated.
The property has been held for more than 3 years and so it qualifies for Long term capital gains.
Next you have to look at Cost of Inflation Index (CII) published by Income Tax Department every Financial Year.
So out of Rs 1 crore that you get out of sale, you would need to invest the entire long term capital gains of Rs 28,76,588 in Capital gains Bond by October 2011 (i.e. within six months of date of sale) to save tax of Rs 5,75,318.
In case you invest only part of the capital gains, the remaining amount would be taxed at 20%.
There is a misconception that the interest earned on capital gains bond is tax free as there is no TDS (Tax Deduction at source) deduction by NHAI. But unfortunately the truth is the interest earned from capital gains bond is added to your income and taxed at marginal rate of your income tax.
The application form for NHAI Capital gains bond can be obtained/ submitted at all branches of IDBI Bank and Union Bank, and select branches of few more banks like Canara Bank, Axis Bank, ICICI Bank, Yes Bank and HDFC Bank
If you want to save your long term capital gains tax on sale of residential property u/s 54EC, there are two options:
As far as the investment in capital gains bonds like NHAI is concerned, the interest offered is just 6% and that too taxable. So at times it might make sense to pay long term capital gain tax and invest the rest of amount in higher return investments.
You can get more details and detailed prospectus and application form from here.
Everyone hates paying taxes and always are on lookout for Options to Save Tax. However…
Are you worried and confused about Lien amount in SBI? Well you are not alone.…
Get details of latest Sovereign Gold Bond Price, Issue details, taxation and how to invest.…
Download the Excel based Income Tax Calculator India for FY 2020-21 (AY 2021-22). This compares…
Piramal Capital & Housing Finance, has come out with Piramal Capital & Housing Finance Ltd…
IIFL Home Loan, the Housing Finance company from IIFL Group has come out with IIFL…
View Comments
No its not true. You have to pay taxes on any capital gains made on sale of residential unit. It does not matter if the unit was bought 10 years back or recent. In case you have held the property for more than 3 years, your gains would be termed as long term capital gains while for less than 3 years holding, its short term capital gains.