To Calculate Cost Of House For Capital Gains, Include All Costs Incurred In Purchase, Repair

Can brokerage, stamp duty and registration fee be paid for a flat sale as part of the cost of acquisition to calculate capital gains? Also, is it possible to add the same components paid in respect of the new flat purchased to arrive at the capital gain exemption under Section 54 of the Income-tax Act, 1961?

Answer: For the purpose of calculating capital gains on sale of any property, the cost will always include the purchase consideration, brokerage, transfer fee paid, stamp duty, and registration charges incurred at the time of purchase of the property being sold now.

This will also include cost of any improvement to the property, if any, incurred by the owner of the property. Likewise, while calculating exemption available under Section 54, you will be entitled to take into account all the costs incurred in connection with purchase of the new property. This will include brokerage, stamp duty and registration charges, and transfer fee, too.

My grandmother is a senior citizen and wishes to gift me a certain sum of money in cash. Can she gift me in cash? If yes, is there any limit for this under the Income-Tax Act, 1961 or any other law?

Answer: As long as aggregate value of all the gifts received during a financial year does not exceed Rs. 50,000, it is not treated as income of the recipient. But once the aggregate value of all the gifts received during the year exceeds that limit, the full value of all the gifts are treated as income of the recipient and taxed at slab rate. However, gifts received from specified relatives, including grandparents are not to be treated as income, irrespective of value of the gifts under Section 56 (2) of the Income-tax Act, 1961.

Under the income tax laws, in case a single gift of more than Rs. 2 lakh is made in cash, the recipient to such gift may have to pay a penalty equal to the amount of such gift. This limit of Rs. 2 lakh applies with respect to each transaction of gift. Do note that the penalty is on the recipient and not on the donor. So, your grandmother can still give you a gift of more than Rs. 2 lakh in cash without violating any provision, but you may have to face the penalty proceeding if value of a single gift transaction exceeds the threshold limit of Rs. 2 lakh.

I am a retired person and earn income from interest and dividend. I have incurred expenditure of Rs. 1.50 lakh on repairs and renovation of my house. Am I supposed to deduct any tax while paying the amount of Rs. 1.50 lakh to the contractor, as the amount exceeds Rs. 30,000?

Answer: The requirement to deduct tax at source is applicable in case of a taxpayer who is an individual engaged in any business or profession, and his accounts are required to be audited under the provisions of income tax laws. Since you are not covered under the above requirement, you do not have to deduct tax at source while paying to the contractor for carrying out repair or renovation of your house.

The author is a tax and investment expert

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