Dilip Lakhani, Senior Chartered Accountant, answers queries from our readers on income tax and other levies.
I had purchased a commercial office property in Delhi in 2000. Now, I want to sell it. How will the Long term capital gains be calculated? How can I save tax on this gain? Can I also save tax if I don’t buy another property? —Sumeet Arora
You have not clarified as to what was the end use of the commercial office property. If it was held as investments and was not used for the purpose of business then you will be liable to pay tax on the long term capital gains. The sale consideration will be the actual sale price received by you or ready reckoner price whichever is higher. You original cost of acquisition can be indexed and the indexed cost of acquisition will be reduced from the sale consideration and you will be liable to pay capital gains tax at 20%. You can invest up to Rs 50 lakh under Section 54EC of the Income Tax Act, 1961 to avail of the deduction from payment of long term capital gains tax.
Can we opt in for 44ADA (the Section in the I-T Act dealing with Presumptive Tax Scheme for Professionals) this year and opt out next year if income is higher than Rs 50 lakh? Then again if income is less than Rs 50 lacs in the following year, can we again go back to 44ADA?
A professional can avail the benefit of presumptive taxation under Section 44ADA if the total gross receipt does not exceed Rs 50 lakh in the previous year. If your total gross receipt is less than Rs 50 lakh in one year then you can opt for presumptive taxation scheme. In the subsequent year if the total gross receipt exceeds Rs 50 lakh or more then the benefit of presumptive taxation cannot be taken. Again in the third year if your gross receipt does not exceed Rs 50 lakh then you can opt for presumptive taxation scheme.
