Read this for practical tax planning..
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One of the popular methods of saving long-term capital gain tax is by re-investing the proceeds into Section 54 long-term infrastructure bonds. But this has a maximum ceiling of Rs 50 lakh per year. What is the solution especially if a family's LTCG income is to be clubbed together?
>>The limit is Rs 50 lakh for each individual and under section 64 of Income Tax Act, because income of minor child or income between spouses is to be clubbed in some cases, for example if an individual invest in the name of minor children then any income earned or any interest or capital gain on that will be clubbed to the higher earning parent's income. Similarly, if husband invests in the name of wife then any capital gain on that will be clubbed with the husband's income.
As the limit is Rs 50 lakh for investing in capital gain bond, if one clubs income and capital gain is more than Rs 50 lakh and the limit of investing in the bond is only Rs 50 lakh, which means one will have to pay capital gain tax on income exceeding Rs 50 lakh.
However, in some cases income tax tribunal has given judgement that while clubbing income, all deductions, which are allowed, should be claimed in the name of individuals and only net taxable income should be added while clubbing. In such case if child, wife, husband, all have capital gain then they can invest individually; Rs 50-50 lakh limit will be applicable for all three individuals and then whatever the extra amount, if applicable that will be clubbed.
So, instead of clubbing together and then investing only Rs 50 lakh, they can take the benefit of this in the light of this judgement that first claim the deduction, invest Rs 50 lakh individually and then apply provision of clubbing of income.
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One of the popular methods of saving long-term capital gain tax is by re-investing the proceeds into Section 54 long-term infrastructure bonds. But this has a maximum ceiling of Rs 50 lakh per year. What is the solution especially if a family's LTCG income is to be clubbed together?
>>The limit is Rs 50 lakh for each individual and under section 64 of Income Tax Act, because income of minor child or income between spouses is to be clubbed in some cases, for example if an individual invest in the name of minor children then any income earned or any interest or capital gain on that will be clubbed to the higher earning parent's income. Similarly, if husband invests in the name of wife then any capital gain on that will be clubbed with the husband's income.
As the limit is Rs 50 lakh for investing in capital gain bond, if one clubs income and capital gain is more than Rs 50 lakh and the limit of investing in the bond is only Rs 50 lakh, which means one will have to pay capital gain tax on income exceeding Rs 50 lakh.
However, in some cases income tax tribunal has given judgement that while clubbing income, all deductions, which are allowed, should be claimed in the name of individuals and only net taxable income should be added while clubbing. In such case if child, wife, husband, all have capital gain then they can invest individually; Rs 50-50 lakh limit will be applicable for all three individuals and then whatever the extra amount, if applicable that will be clubbed.
So, instead of clubbing together and then investing only Rs 50 lakh, they can take the benefit of this in the light of this judgement that first claim the deduction, invest Rs 50 lakh individually and then apply provision of clubbing of income.
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♥ Pulla Harsha Vardhan ♥
© pullaharshavardhan.blogspot.in ©
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