LTCG tax from sale of property is paid in proportion to the ownership ratio

LTCG tax from sale of property is paid in proportion to the ownership ratio

The basis of apportionment of capital gains in the hands of co-owners, where the property sold was jointly owned or funded, has not been specifically prescribed in the Income-tax Act. The same may, therefore, be considered on the basis of general interpretation of law and various judicial precedents in this regard.

Generally, each co-owner should be liable to pay tax on the capital gains arising from the sale of the property in proportion to the percentage of their respective ownership and funding. This would need to be substantiated with legal documents (purchase deed) as well as respective sources of funding and the proportionate cost. The capital gains tax liability should accordingly be split between you and your husband in the ratio of the amount contributed by each of you individually towards acquisition of the property.

I invested 50,000 in an equity-linked savings scheme (ELSS) in March 2015 and I redeemed all its units in April 2018 and got67,000. What will be the tax implication?

Jaisingh Ahuja

The amount invested in ELSS is similar to buying units of an equity-oriented mutual fund and is considered as investment in a capital asset.

Effective 1 April 2018, LTCG arising on the sale of listed shares or units of equity-oriented mutual funds in India that are held for more than 12 months before sale, are taxable, to the extent that such LTCG exceeds 1 lakh in the given FY, provided securities transaction tax (STT) has been paid both at the time of purchase and sale of the shares or units of mutual funds. LTCG is taxable at a special tax rate of 10% (plus applicable surcharge and cess).

You can opt to use the highest listed price of the units as on 31 January 2018 in place of the actual cost of purchase, provided the listed price is less than the actual sales value. The resultant capital gains (if any), to the extent it exceeds 1 lakh would need to be taxed at 10% plus applicable surcharge and cess. In your case, assuming that you do not have any other similar LTCG, there shall not be any tax liability upon sale of the units under ELSS as the sale value itself is less than 1 lakh.

The above would, however, need to be reported appropriately in your income tax return for FY2018-19.