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Income Tax: Wealth tax wont be applicable from current fiscal year
September, 29th 2015

I own two flats. I stay in one of them and other is under construction. Will wealth tax be applicable in my case?

Wealth tax is applicable on specified assets as defined under section 2(ea) of the Wealth Tax Act, 1957. As an under construction flat does not fulfil the conditions of a building, it is an incomplete asset and hence cannot be treated as an asset under section 2(ea). Thus you are not liable to wealth tax for the under construction flat. Section 5(1) of the Act exempts any one house property of an individual from wealth tax. Thus you could claim exemption of the same. Hence, there shall be no wealth tax liability on the said flats in the present case. Also, as per Finance Act 2015, the wealth tax is proposed to be abolished. Hence, it shall not be applicable from FY16 onwards.

In 2012, I purchased an under construction residential house for which I had claimed exemption under section 54F of the I-T Act. The sale deed is pending as completion certificate is still not being issued by municipal authorities.

Can I claim exemption even if the construction was not completed within three years from the date of transfer?

The requirement of Section 54F of the Act is that the assessee should construct a residential house within a period of three years from the date of transfer. However, based on judicial precedents, the benefit of exemption is available where the assessee had invested the consideration received on sale of a capital asset, in the purchase of the plot of land and started construction though not completed in all respects. Therefore, the thrust of the provision is on the investment of the net consideration received on sale of original asset and the start of construction of a new residential house. So, if the entire payment is made and the sale deed not yet executed, one can still get the benefit of section 54F.

I have an annual income of above R6 lakh and have donated 20,000 under 80G. So, how much amount can I deduct as an exemption from paying tax?

All deductions under section 80G are permitted up to 50% except for few donations which are eligible for 100% tax benefit. Assuming the donation made by you fall into the 50% category, you shall be able to claim maximum deduction of R10,000.

I own a house which is rented out and am living in a rented house myself. I claim tax deduction for the home loan. Can I claim HRA benefits as well?

Generally in case of employment, an employer does not simultaneously permit deduction under section 10(13A) i.e. HRA deduction as well as tax benefit for repayment of housing loan. You need to separately claim the same while filing the return of income. In case of let out property, there is no upper deduction limit on interest component of the housing loan and can be claimed as deduction while computing the income from house property. However, the same is restricted to R2 lakh in case of self-occupied property.

I sold a flat in Delhi in May 2014 and the entire amount was spent to buy a flat in Gurgaon. The possession of this new flat is expected by May 2016. At the time of possession, the flat’s value is expected to be over R1 crore. If I choose to sell this property, will I have to pay capital gains tax on this transaction?

It is assumed that your flat in Delhi which you sold was a long term capital asset, i.e. you had held for more than 36 months. To avail of the capital gains exemption under section 54, you had invested Rs 90 lakh to purchase another under construction flat in Gurgaon. To avail exemption from capital gains tax, the new residential property is required to be held for 3 years from the date of its completion of construction. But in your case, the new property will be held for less than 36 months, and will be treated as a short term capital asset and taxed at the normal slab rate applicable in your case.

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