Your Queries: Income Tax | House held for two years-plus classified as long-term capital asset

By Chirag Nangia

I had purchased a property jointly with my father in 1987. We invested Rs 1.6 lakh each then. My father’s will gave his 50% share to my mother. My mother sold her 50% share to me in October last year for Rs 25 lakh. I had another property which was sold in 2021 and used the capital gains to buy the 50% share of the property sold by my mother to me. I now intend to sell the flat at Rs 90 lakh and buy a new property with the sale proceeds. How do I avoid capital gain tax?
—C Srinivas

For tax purposes, immovable property is classified as long-term capital asset if it is held for a period exceeding 24 months, else, the same is regarded as short-term capital asset. In order to compute capital gains, cost of acquisition, cost of improvement and expenses (incurred wholly and exclusively in connection with the transfer) are to be deducted from the sale consideration. The cost of acquisition and improvement is indexed in case of long-term capital assets to account for inflation over the years. Taxation of long-term capital gains (LTCG) is at 20% (including surcharge and cess as applicable). The short-term capital gains shall be taxed at the applicable slab rates.

Further, tax exemption of LTCG on transfer of a residential house property is allowed if you invest the capital gains either for purchase of another residential house property within one year before or two years after the date of transfer or in the construction of another residential house property within a period of three years from the date of transfer.

My mother, aged 75, subscribed to a health card by DGHS and paid Rs 78,000 this year. Is this amount eligible for exemption under Section 80D?
—Girish Keswani

Section 80D provides deduction for amount paid as mediclaim insurance premium or any contribution made to the CGHS scheme or such other scheme as may be notified by the Central government in this behalf or any payment made on account of preventive health check-up. Further, senior citizens can claim deduction up to Rs 50,000 paid on medical expenses incurred by them, if no amount has been paid as premium on health insurance. Since the payment made by your mother does not fall under any of the aforementioned categories, the expenditure will not qualify for deduction under Section 80D.

The writer is director, Nangia Andersen India. Send your queries to fepersonalfinance@expressindia.com.