Loss on house can be offset

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QI have retired from a private company seven years ago. Now my age is 66 years. After my retirement, I did not submit any income-tax return as I am earning below the exemption limit. Now I want to sell my plot of land for `30 lakh. I had purchased in May 2001 for `80,000. Kindly clarify whether amount that I am getting is taxable? What will be my tax liability? A) The sale of plot will result in “long term capital gains” and you will be liable to pay income tax at rate of 20 per cent (plus education cess) on such long term capital gain. The amount of `80,000 invested 17 years ago will be eligible for the cost inflation index. However, since the amount invested is very small even after applying the cost inflation index for FY.2017-18, the amount of indexed cost of acquisition will come to `2,17,600 i.e. 272/100 x 80000 (100 being cost inflation index of financial year 2001-02 and 272 being cost inflation index of Financial year 2017-18). The capital gains tax liability can be avoided if the long term capital gains are invested in capital gain bonds specified under Section 54EC of the Income-Tax Act, 1956, for a period of three years. Further, in the case of individuals and Hindu Undivided Families, where the total (taxable) income as reduced by long-term capital gain is below the basic exemption limit, the long-term capital gain will be reduced to the extent of the shortfall and the balance long-term capital gain will be liable to be taxed at a flat rate specified above.

QRAM NARESH Via email I am having two flats in Kerala. One is rented out and my family was staying in another for first 2 months of this financial year. We moved to Hyderabad in April 2017 and the flat I was living in Kerala is rented out. In Hyderabad, I stay in a rented house. Now from the perspective of claiming housing loan interest, which house should I declare as self occupied. I don’t have any self occupied house in Hyderabad. The house in which my family was staying in Kerala is rented out from June 2017. Can I declare this house as self-occupied and claim loss of income on account of interest on housing loan? If I declare this house as self-occupied, how do I account for the rental income I got for the period from June 2017? VERGHESE Via email A) As the house which was self occupied by you for the first two months of financial year is rented out from April 2017, you need to admit the rental income in your return of income for the FY 2017-18. You can claim the interest amount (apart from the statutory deduction of 30 per cent towards maintenance) against the rental income received on the flat let out. If the net result of the computation under the head “income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee will not be entitled to set off such loss — to the extent the amount of the loss exceeds `2 lakh — against income under the other head. The balance of loss under the head income from house property exceeding the amount of `2 lakh can be carried forward for setoff against the same head for eight subsequent years. (The writer is a chartered accountant. You can your send queries to info@rathiandmalani.com)