Relief for senior citizens
45. Under the provisions of section 88B, any person aged 65 years or above, having gross total income not exceeding Rs. 75,000, is allowed a special rebate of 20 per cent. of the tax chargeable on his total income.
45.2. The Finance Act has increased the tax rebate for senior citizens under section 88B from 20 per cent. to 40 per cent. and enhanced the qualifying limit of total income from Rs. 75,000 to Rs. 1 lakh.
45.3. This amendment takes effect from 1-4-1995 and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years.
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Capital gains to be invested only in residential property
by A.N. Shanbhag
Q: Please answer the following queries —
1. If one earns capital gains from sale of house, can one save taxes by investing the same in a plot of land?
2. If one builds a house on that plot after two years can one save capital gain tax? Even if the house is rented out? If the house is sold?
3. Will capital gains from sale of a plot be treated as capital gains from sale of a house?
4. A house sold in the current year was renovated (improvement) 10 years earlier as per plans submitted to the municipality. However, there is not evidence of the expenses incurred. Can the owner consider the advantage of the renovation (additional expenses) to calculate capital gains?
A: 1. No. Section 54 requires the capital gains to be invested only in a residential property.
2. The assessee can claim exemption under Section 54 by investing the long term capital gains (not the entire sale proceeds) to purchase a residential house within one year before or two years after the date of sale of the old house. Alternatively, a residential house may be constructed within three years after the date.
3 Capital gains from sale of a plot is not the same as capital gains from sale of a residential house for purpose of saving taxes.
4. We presume that you have got the permission given by the municipality on your record. and you have got proof of the fact that you have renovated the property and the extent to which you have renovated is there in the blueprint. In that case, you can obtain an official chartered valuer to assess your value addition and use this figure for computing the capital gains.