All posts by Vidyadhar Naik

Property Consultant I Founder Bangalore Real Estates I Member BRAI I Expert-Times of India Group I Blogger on Bangalore Real Estate Market Trends I

How to calculate your long term capital gain tax in property sale

Know how to calculate your long term capital gain tax in property sale and save money when you sell property.  By Vidyadhar Naik, Property Consultant Bangalore. M:9035611299

People buying property for investment purpose and selling it after some time has become common among Indians in the last 10 years. I am writing this article to know the tax implications involved in property sale from the long term capital gain point of view in property sale.

What is capital gain?

A capital gain is a profit that results from a selling of stockbond or real estate etc. The gain is the difference between a selling price and purchase price. Capital gains may refer to “investment income” that arises in relation to real assets, such as property; financial assets, such as shares/stocks or bonds; and intangible assets.

Types of capital gain:

Short Term Capital Gain: If property is held for less than three years before selling it, then it is considered a short-term capital gain (STCG) and one has to pay tax according to your normal income-tax slabs

Long Term Capital Gain: If property is sold after three years, then it’s considered long-term capital gain (LTCG) and one has to pay 20% of the profit as tax.

What is Cost Inflation Index?

It is a measure of inflation that finds application in tax law, when computing long-term capital gains on sale of assets. The cost inflation index is issued by Central Direct Board of Taxes (CDBT). Asset purchased in 2014 normally would be higher than the year 2009. This is due to declining price of rupee year after year.

CII Chart

 

Year

Index

Year

Index

1981-1982

100

1997-1998

331

1982-1983

109

1998-1999

351

1983-1984

116

1999-2000

389

1984-1985

125

2000-2001

406

1985-1986

133

2001-2002

426

1986-1987

140

2002-2003

447

1987-1988

150

2003-2004

463

1988-1989

161

2004-2005

480

1989-1990

172

2005-2006

497

1990-1991

182

2006-2007

519

1991-1992

199

2007-2008

551

1992-1993

223

2008-2009

582

1993-1994

244

2019-2010

632

1994-1995

259

2010-2011

711

1995-1996

281

2011-2012

785

1996-1997

305

2012-2013

852

2013-2014

939

What is Property Acquisition Cost?

Property Acquisition Cost= Basic sale value + Improvement Cost + Stamp Duty + Registration Cost + Legal fees + Advertisement Cost + Brokerage + Others (Others: Any other cost involved in the process of acquisition    of a specific property)

What is Indexed Cost?

Indexed Cost     =         Actual Cost *      Cost Inflation Index of the Year of Sale/Cost Inflation Index of the Year of Purchase

Typical Example of Long Term Capital Gain Tax Calculation

A purchased property in July 2008 for a basic sale value of INR 3000000. He also paid in the process of acquiring the said property, Brokerage: INR 30000: Legal Fees: INR 15000: Registration and Stamp Duty: INR 200000. A spent INR 100000 for improvement of the purchased property in September 2009.A sold the property in January 2014 to B for INR 5500000. A paid brokerage INR 55000.

Acquisition Cost= 3000000+30000+15000+200000=3245000

CII value 2008-2009 = 582

CII value 2009=2010 =632

CII value 2013-2014 = 939

Indexed Cost  of acquisition         =         Actual Cost *      Cost Inflation Index of the Year of Sale/Cost Inflation Index of the Year of Purchase

=         3245000*939/582=5235489.4

Indexed Cost of Improvement =         Improvement Cost* CII of 2013-2014/CII of 2009-2010

=          100000-*939/632=148575.94

 

Calculation of long term capital gain

 

(Sale value-brokerage)-(Indexed Cost of acquisition + Indexed cost of Improvement)

(5500000-55000)-(5235489.4+148575.94)=609346.6

20% of 609346.6=12186.93 is the amount to be paid by A as long term capital gain tax.

Long Term Capital Gain Exemptions

a) The capital gains from the sale of a house if the taxpayer invests the gains in a residential property within two years from the date of sale or constructs another house within three years from the date of sale. One should not own more than one house, besides the house one is investing in.

b) Investment in Bonds issued by NHAI and REC with a maximum limit of INR 5000000 and a lock-in period of three years.

Capital Gain Account Scheme (CGAS)

If a property has not been identified and purchased before the return has been filed or before the due date for filing the tax return, whichever comes earlier, the money has to be deposited in a special account known as the Capital Gain Account Scheme (CGAS). Any withdrawal from CGAS should only be for payments to be made in relation to the purchase of the new property.

Types of Capital gain Account Scheme

Savings deposit account: Suitable for people who are planning to construct a house over a period of time with different stages of withdrawals. The amount withdrawn should be used for housing purpose only within 60 days from the withdrawal date.

Term deposit account: Suitable for for purchase of house with one time payment. Amy withdrawal from this account in a pre maturity period attracts penalty.

So be ready to get the best benefit of capital gain in property sale

LOCAL SPACE

Vidyadhar Naik-Property Consultant

Email:vmnonline@bangalorerealestates.in

 

 

Flats below 30 lakhs in Bangalore

Flats below 30 lakhs in Bangalore

Flats below 30 lakhs in Bangalore expected to be in more demand in the coming months in Bangalore. Bangalore is all set to see  increased  sale in housing from mid income group buyers in 2014. I list following factors for this expected good growth.

1Economic Environment:

CPI and Core Inflation value predicted to be under control. GDP likely to touch above 6 at the end of fourth quarter 2014-15 as per world Bank prediction. Over all it is going to be blend of transition and error correction year 2014-15 for India.

2 Housing Loan:

Housing Financial Institutions are getting equipped themselves with funds to support mid income group home buyers for housing loan. Recent arrangement of LIC HFL from overseas markets through external commercial borrowings (ECB) for $ 300  M  got approval from RBI is clear indication for this housing segment. Housing Financial Institutions are likely to target on flats below 30 lakhs in Bangalore

3 Infrastructure-Bangalore:

20-minute ride between the Kempegowda International Airport and the Hebbal flyover is on the verge of becoming a reality. First section of the six-lane measuring 3.7 kms elevated expressway along the Bellary Road and leading to the airport from Hebbal flyover to Kogilu Cross, after Yelahanka was made available to public on January 1st 2014. The two other sections of the expressway will be ready and thrown open to the public in 30 days. There are at least 20 major roads which are to be completed by April- May 2014. This will help buyers to look for houses in around theses area which are connected to major real estate corridors of the city. Road infrastructure development on the peripheral of NICE road has opened up new Real Estate corridor.

Metro Phase I to be fully ready by March 2015. Commercial operations between Peenya and Malleswaram would start at any day from now. Phase I span a length of 42.3 km and consist of 2 lines. M. G. Road to Byapanahalli in operation. Peenya to Nagasandra, Sampige Road to National College, National College to RV Road expected to be completed by DEC 2014.

The State government has decided to go ahead with the construction of a state-of-the-art peripheral ring road around Bangalore at a cost of Rs. 5,800 crore It would be a six-lane or an eight-lane road and the total length would be about 65 km.

State government trying its best and serious efforts to make infrastructure development of the city to fulfill its promises to Bangalore citizens and as well as keeping in mind coming MP Elections. These rapid developments would certainly reduce commuting time for Bangaloreans by 40% by the end of this year. Travelling time from dwelling places to work place or business place which is a major headache for Bangaloreans, likely to be solved in the next 12 months.

4 Civic agencies

BDA/BMRDA/BIAAPA/BMICAPA have put their norms and regulations in place. These agencies appear to be clearer about their responsibilities and their governing laws. This would create more confidence in buyers especially in mid income group who are looking for transparent buying process systems.CDP Plan of 2014 give clear picture about zoning areas and regulations. Metro Politian Committee expected to solve problems of Real estate community by making technical process and implementation corrections to obey  and implement High Court order in 3-4 months.

5  Real Estate Community:

Above and all entire Real estate community which includes Government Policy makers, Different Associations, Builders. Developers, Corporate real Estate houses, Property advisors and Consultants are evolving towards organized Real Estate sector.

I would like to conclude saying that Governments, Local Civic agencies, Housing financial institutions and organized real estate sector will provide a platform of fair and transparent deal for all buyers especially mid income group buyers in 2014. Let us also keep watch on inventory of unsold properties of the  year 2013-2014. Whether the sale comes from Information Technology professionals or investors for gain, but 2014 will be better one for  for flats below 30 lakhs in Bangalore

 

Following article may be useful to you:

http://bangalore-realestates.blogspot.in/2014/01/capital-gain-in-property-sale_11.html

 

LOCAL SPACE

Vidyadhar Naik-Property Consultant

 

 

Bangalore CDP

Bangalore CDP

Bangalore City

Bangalore CDP  Plan Implementation:

Let me explain in brief about CDP .

What is CDP ?

CDP means Comprehensive Development Plan.  This plan includes various factors of present and future growth of a city keeping in mind city’s natural environment and heritage. As per  Karnataka Town and Country planning Act 1961,section 25 CDP should be revised every 10 years. The first CDP plan was made in 1984. Let us not get into details of subsequent CDP plan made/revised for Bangalore city. Let me directly to Jump to  Bangalore CDP plan.

Bangalore CDP Bangalore Development authority is entrusted  to prepare CDP 2031.

As per BMR (Bangalore Metropolitan Region) following are the authorized civic agencies .

Bangalore CDP
Bangalore CDP

Let me also explain about BMRDA. Bangalore Metropolitan Region Development Authority (BMRDA) is an autonomous body created by the Government of Karnataka under the BMRDA Act 1985 for the purpose of planning, co-coordinating and supervising the proper and orderly development of the areas within the Bangalore Metropolitan Region (BMR) which comprises Bangalore urban district, Bangalore rural district and Ramanagara district.

As per the Structure Plan, apart from BMA (BDA jurisdiction), the rest of the Bangalore Metropolitan Region [BMR] is divided in to five Area Planning Zones (APZ’s) and six Interstitial are proposed along the corridors, which are (1) Bangalore-Bidadi (2) Bangalore-Nelamangala (3) Bangalore-Devanahalli (4) Bangalore- Whitefield, Hoskote (5) Bangalore-Anekal, Sarjapur-Hosur.

The Area Planning Zones (APZ’s) are areas  where urban development is permitted subject to certain regulations.  The Interstitial Zones are the areas lying between APZ’s where urban activities are restricted giving more emphasis to environmental – issues like conservation of forest area, agriculture etc.

Till now the CDP plan was taking care mainly on  change of land use and zoning regulations. Of course this is very  much core area of CDP. We have seen many illegal residential layout built on Agricultural land and also industries. CDP will clearly define which are residential /industrial/green belt areas.

Now  CDP should clearly define and correlate its plan to various government departments like Electricity, Water supply, Telecommunication, Sewage and Drainage. Infrastructure. Industries  and also Forest etc.

Growing population, increasing vehicles, pollution and existing high density area of Central Business district are to be addressed from all angles. CDP does not mean plan for growing areas but also for unstructured developed areas of the city.

But City needs one short term CDP  /Emergency/Contingency plan to address immediate problems of public in 2014 itself. One should wait and see how ancillary use in residential areas will be handled by government. What are the hurdles BDA will have in Bangalore CDP  2031 process and implementation from legal point of view? What will be the role of MPC? (Metro Politan committee). How active participation of various citizen groups will help and guide through its think tank?

I conclude saying how Bangalore CDP 2031 will address all issues in 8005 square kilometer area, only coming days will throw the picture on this.

LOCAL SPACE

By: Vidyadhar Naik-Property Consultant

Reference: BMRDA.

Real Estate Investment

Real Estate Investment

Despite of India’s poor inflation control in the years 2012 and 2013 and overall slow down in the global business sectors still Bangalore Real Estate Investment has lot of potential in India. Central Statics offices data clearly indicate bad inflation control which is official publisher of Government of India.

I list following factors to explain why Bangalore Right Place for Real Estate Investment in India.

1 NRI investment has increased significantly in buying new properties for self use who would plan to return to India. Reinvestment from NRI from the property sold to save tax on capital gain. NRI who have considerable assured regular local income are investing in new properties.This section belongs to Top level IT professionals who are outside India from the last 10-15 years. This may not hold good for other cities like Mumbai or Delhi.

2 Increasing price over a period of time has forced first time property buyers to go for it as early as possible. Fear factor of Price making salaried employees to purchase at the earliest.

3 There has been no decline in recruiting new employees either in IT or IT enabled services. Still Bangalore is the number one IT/ITES outsourcing destination in the global market place.

4 India is likely to witness the second highest demand for office space in 2014 among the top 30 cities in the Asia-Pacific region, according to a report by property consultancy Cushman & Wakefield, which says Bangalore is expected to be the biggest market in the country due to the expansion of IT, ITeS and multinational companies. This is clear indication of new employment opportunities.

5 Travelling time likely to cut down by 40% by 2015 to any part of Bangalore from CBD or Residential areas to work places/business places. This is due to Metro and completion of all roads like inner ring road, outer ring road ,Feeders to metro junctions and to NICE road.

6 Bangalore’s cosmopolitan culture blended with its own traditional culture gives space to everybody to live in harmony.

7 Whether you are from Northern or Southern part of India , all dreaming to have property investment in Bangalore.

You may like : http://bangalore-realestates.blogspot.in/2014/01/bangalore-cdp-challenging-one-for-bda.html

LOCAL SPACE

By Vidyadhar Naik-Property Consultant

Residential Plots in Bangalore

Residential Plots in Bangalore

Huge demand for residential plots in Bangalore along with flats and availability of the same improving a lot. The demand and supply tending towards equilibrium. Time since Government of Karnataka tried to make Urban development structured one, the demand for residential plots in Bangalore also increased . I would like to list how residential plots in Bangalore opportunity is being created and complications involved in the same. Which plot is right one to buy?

Following factors contribute for formation of new residential plots in Bangalore.

1 Increasing population.

The city’s population stands at 95,88,910 as of now, according to  Census 2011 data released here . One of the most attractive employment destinations in the country over the last decade or so, Bangalore’s population has grown by 46.68 per cent, between 2001 and 2011, up by nearly 12 percentage points over the growth rate of 35 per cent in the previous decade.

2 Bangalore is Information and Technology Hub of the country.

Bangalore including Mysore, Mangalore and Hubli contributes 40% of Total IT Exports. Around 3.5 lakhs IT professional are working in Bangalore. Average salary drawn by IT professional(4-8 years experience) is between 8 – 16 lakhs depending upon organization. Average productivity in Company like TCS is 47000US$/person. This is much higher in companies like IBM and Accenture due to their services in cutting edge technologies. Around 55-60% is spent on salary component. This gives clear picture of property buying index for IT professional is much higher compared to others.

3 BDA unable to form time bound new Residential plots in Bangalore quantitatively.

4 Extension of BMRDA jurisdiction paved way for private developers to form new  residential lay outs which are BMRDA approved.

5 Completion of Outer ring Road, Nice Road corridor, Metro and Completion of Kempegowda International Airport Road, Emerging Neo Bangalore near Hoskote, Fresh Tender Call for Bangalore-Bidadi Infrastructure corridor.

6 Formation of Andhra and Telangana would create huge investment opportunity towards north Bangalore and demand for residential plots which are DTCP approved.

7 Financial Institutional provide loan for buying these sites with certain terms and conditions.

Misguiding Factors for common buyer in purchasing residential plots in Bangalore

1 Common buyer can not do much on the following .

a)      Karnataka Town and Country Planning Act 1961

b)      Karnataka Land Reforms Act 1961

c)       Karnataka Revenue Land Act 1964

Loop holes of these laws give opportunity for  private developers to use intelligently in formation of residential layouts which are illegal by process and act. Such layouts carry only endorsements by concerned authorities.

Right Plot to buy

1 BDA approved

2 BMRDA/BIAAPA/BMICPA approved ( Only Released sites)

3 DTCP approved(Only Released sites)

4 NOC issued by local planning authority for formation of residential plots in Bangalore and also mentioning that there will not be any future acquisition of land by authorities.

5 If you are buying plots within BBMP jurisdiction I suggest to hire services of professional Lawyer who has expertise in property domain. BBMP limit sites include many revenue and Grama thana sites. Akrama and Sakrama applicable sites with buildings on it.

6 Karnataka housing Board developed sites/flats.

LOCAL SPACE

By Vidyadhar Naik-Property Consultant