We built a house in 1995 by demolishing our grandfather’s ancestral house. All of us five siblings are married. Now we want to sell the ancestral house at the ancestral place. Each will get 10 lakhs. Do we have to pay any tax on this? Is there any way to save tax?
Since you have held the property for more than 24 months, the gain will be taxed on: long term capital gains, Since the house was constructed in 1995, you have to take the market value of the house as on 1st April 2001 for computing capital gains as the fair market value (FMV) of the house as on 1st April 2001 can be taken as its cost. Is. Calculating your capital gains. To get the FMV you need to approach the appraiser of the property and get the appraisal report from him.
Please note that the FMV value of the house cannot be less than the stamp duty valuation or circle rate as is popularly known. On this FMV you need to apply the Cost Inflation Index (CII) to arrive at its indexed cost. The difference between the selling price and the indexed cost is the long-term capital gain.
It is likely that all five of you siblings have inherited this property, so 1/5 of the long-term capital gains calculated in the manner described above will become taxable to each of you. You will have to pay tax on such long term capital gains at a flat rate of 20.80%. You can save capital gains tax by investing long-term capital gains to buy or build a residential house or by investing long-term capital gains in capital gains bonds of REC, NHAI, RFC or PFC within the time limit prescribed under section 54. 6 months from the date of sale of house under section 54EC.
Balwant Jain is a tax and investment specialist and can be contacted on Twitter at jainbalwant@gmail.com and @jainbalwant.
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