Question: I am getting an offer of 15L for selling my house. I bought the house for Rs 5 lacs in 1998-99. If I dont invest in another property with the proceeds, what are the tax implications?

Answer: This Asset has been held for more than 3 years and thus the tax rate would be 20% on Rs. 5 Lakhs

However, this can be saved in case you invest this amount in another residential property under

• Section 54 - i.e. you invest this Rs.5 Lakh in purchasing a Residential Property.
• The new property has to be purchased within 2 years from the sale of this flat or 1 year before the sale of this flat.
• Till the time the flat is not purchased - you have to deposit this amount of Rs. 5 Lakhs in an escrow account with the Govt.

Moreover, you to have to hold the new property for a minimum of 3 years before selling ti again else all the capital gain exempt would again get taxable

Or the other option is availing tax exemption by investing in tax saving bonds under

• Section 54EC - You'll have to invest Rs. 5 lakhs in these bonds.
• The interest rate of these bonds is usually less than the interest on FD.
• Tax is payable on the interest earned from investment in these bonds The investment in these bonds has to be made within 6 months of the sale of property.
• Many infra companies like IFCI usually release these bonds in the last quarter of the financial year, so you can expect some public issues of these bonds in the next quarter.

You can invest in any of the above options or a combination of the two, based on your needs and requirement

Capital gains on the sale will be ( presuming buy in 1998-99 and sale in 2011-12) 5 x 785 /351 = 11.18 Sale consideration 15 lakh

Capital gains = 15-11.18 = 4.82 Lakhs Tax @ 20 % =96400

If you want to save tax, you can but bonds worth Rs 4.82 Lakhs in any bond for 54EC purpose which is right now not available in market , but in coming months it may come. One can invest in 54 EC in a period of six months from the date of transfer of property.

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