SC Vasudeva
Q. I am a senior citizen of 82 years. I bought a house for Rs 12 lakh in April 2010. Now, I want to sell this house and it will fetch me Rs 1 crore. Out of the short- term/long-term capital gain, I want to construct a house on a plot which I already have. The construction cost is likely to be Rs 35-40 lakh and it may take 2-3 years for completion. My queries are as under:
(a) What will be the long-term/short-term capital gain?
(b) I want to invest the remaining amount (after constructing the house) in five-year tax saving bonds.
(c) How much amount should be invested in the bonds as the exact cost of construction cannot be predicted due to fluctuation in prices of raw materials.
(d) Can I give short-term/long-term capital gain amount to my son as a gift to construct his own house?
(e) If the reply to query (iv) is no, then when should I invest in bonds, just after the sale of my house or after the new construction is completed. —Ram Kumar
A. a) It will be a case of long-term capital gain as you were holding the house for a period of more than two years. The amount of long-term capital gain would work out at Rs 79,88,024 after taking into account the indexed cost of Rs 20,11,976. The amount of indexed cost has been computed after taking into account the cost inflation index notified for financial year 2018-19. The amount of indexed cost would go up after taking into account the cost inflation index for the financial year 2019-20.
b) You can invest in tax-saving bonds to the extent of Rs 50,00,000, being the maximum limit permissible under the provisions of the Income-tax Act 1961 (The Act). You will, therefore, have to pay tax on the balance amount of Rs 29,88,024.
c) The amount of long-term capital gain if gifted to your son would not enable you to avail the exemption from the taxability of the amount of long-term capital gain.
d) Investment in tax-saving bonds is required to be made within six months of the date of sale of the capital asset so as to avail the exemption from taxability of long-term capital gain.
Q. With reference to a query regarding fixed medical allowance, published in these columns on October 1, 2018, it has inter alia been clarified that a senior citizen is allowed a deduction of Rs 50,000 under Section 80D of I/T Act from his total income in respect of medical expenditure from assessment year 2019-20 onwards. It has also been advised that any amount spent towards preventive health check-up shall be deductable to the extent of Rs 5,000 under Section 80D(2A) of the Act. I am a retired Central government servant and in receipt of fixed medical allowance of Rs 1,000 p.m. Kindly advise whether a deduction of Rs 50,000 and Rs 5,000 under Section 80D & 80D(2A) towards medical expenditure on the treatment in government hospitals/ private clinics is allowable to me for the assessment year 2019-20. Kindly also advise what formalities are required to be completed for claiming the deduction for the requisite expenditure. It is presumed that the expenditure on account of carrying out eye operation in the government/private hospitals is allowable for deduction. —PDS Sharma
A. A deduction is permissible for the medical expenditure incurred by an assessee who is a senior citizen to the extent of Rs 50,000. Such an expenditure, in my opinion, should include the expenditure incurred on medical treatment of the eyes which may also include the expenditure on operation if so suggested by the doctor. The expenditure incurred should be supported by the prescription as well as the bills and receipts for the payment made towards such medical expenditure.
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