Tax benefits for capital gains capped at Rs 50 lakh

My mother owns a piece of land in a prime location in Chennai, which was gifted to her by my grandfather in 1943 at the time of her marriage. If she sells it now, will it attract capital gains? If so, how much?
C. Gangadharan, Via e-mail

As per the provisions of Income-Tax laws, in case the assessee has acquired an asset by certain specified modes such as gift, will or inheritance, then the cost to the previous owner shall be adopted as the cost of acquisition. If the capital asset became the property of the assessee before April 1,1981, he/she has the option of substituting the fair market value (FMV) as on April 1, 1981 in place of the original cost. Hence, you can adopt the fair market value on the date specified above as the cost of acquisition of the plot of land. You will also be eligible to take the benefit of cost inflation index applicable for financial year 1981-82 with a base of 100 and the cost inflation index for the current financial year is 711. Therefore, the cost of acquisition of the property proposed to be sold will be increased by 7.11 times of the adopted fair market value as on April 1, 1981. Your query is silent on the amount receivable on the sale of property. The indexed cost of acquisition calculated after applying the cost inflation index discussed above will be deducted from the net sale consideration received on the sale of property and the balance remaining shall be taxable under the head “capital gains” as long term capital gains at 20.6 per cent.

However, the long-term capital gains can be reduced/avoided by investing in capital gain bonds of NHAI or REC as specified under section 54EC, within six months from the date of sale of the property, subject to a ceiling of `50 lakh during any financial year. Further, you also have the option of investing the sale proceeds in a residential house subject to fulfillment of certain conditions laid down under Section 54F.

I am a senior citizen. I am working as a photography consultant for a Bengaluru-based organisation for the last three years. I am not on their pay roll and not entitled for any benefits but I receive a certain service charge regularly. This is a uniform amount throughout the year. Over and above this, I am also eligible for a commission on each job handled over and above a specific number which is not a regular happening. Tax is deducted at source.
Kindly clarify under what head my income will be taxed. I have not received refunds claimed in earlier years. Please advise me the procedure to claim the refund.
Janardanan.K.P, Via E-mail

Your income from consultancy and commission should be reported under the head “profits and gains from business or profession”. You are also eligible to claim any expenses incurred towards carrying out the said business.
With regard to your refund, you are advised to meet the assessing officer, where your return of income is filed along with the acknowledgement of the return filed and the computation statement to check the status of your refund amount.

Kamal Rathi is a chartered accountant,
representing Rathi & Malani, a Hyderabadbased
accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com [1]