Readers' Corner: Taxation

I sold my house in April for Rs 55 lakh. At that time, the purchaser didn’t deduct the mandatory one per cent tax deductible at source (TDS). Four months later, he is seeking money so that he can pay TDS. What are the tax-related problems I can face if I don’t give him the TDS amount? I have not paid capital gains on the profit. The money is lying idle in my bank account. I had purchased this property in 1991. A chartered account told me to wait until the income-tax department comes up with new inflation index (CII). Should I wait or pay capital gains based on old CII? Finally, I wanted to know if there are any deductions or investments that I can claim or make to reduce my capital gains outgo?

The buyer of an immovable property is  under obligation to deduct one per cent TDS on the payment made to a resident seller at the time of making such payment (on each instalment) where the sale consideration exceeds Rs 50 lakh. In your case, the buyer should have deducted tax at the time of transaction. He is now exposed to the penal interest and penalty. Since this a default on the part of buyer, you will not be responsible for any tax or penalty under the law. If you pay him and he discharges the TDS obligation, you should be able to avail the credit of such TDS in your income tax return.  As a seller, you should compute capital gain tax liability on this sale after claiming credit of TDS, if deposited by the buyer and any balance tax liability due should be deposited as per remaining advance tax instalments if the outstanding tax is more than Rs 10,000. You already have missed the first instalment of advance tax due on 15th June. Since property was held by you for more than two years and hence, the gain is subject to long term capital gain (LTCG) tax. Since you bought the property in 1991, you can use Cost Inflation Index (“CII”) of 2001-02, that is 100 and the CII of FY 2017-18 is notified to be 272. You can  compute your capital gain tax liability. If you want to save capital gain tax, you have multiple options - you can reinvest the gain in another residential property and can claim an exemption under section 54. Alternatively, you may also invest in specified bonds up to Rs 50 lakh to avail exemption under section 54EC, but that would need to be done within six months of the sale of the property.

I am planning to buy a car through my office scheme which is a zero interest-free loan. The car will be leased by my employer and remain in my employer’s name till I leave the company at which point I can buy it. This is the variable component of my salary package. The human resource department says that other than the monthly loan instalment, which does not involve any interest component, there is no payment that I have to make. This scheme will also give me tax exemption. Is this true?

You question is not clear and not sure how your employer is providing the car. For your understanding, the general rule is employer provides car to its employees for personal and official use, whether by purchasing a car in company's name or taking a car on lease/hire from third party vendor, the same is taxed concessionally (Rs 1,800/ Rs 2,400 per month depending on the cubic capacity of the car). Further,  where driver’s salary is also reimbursed by the company, an amount equal to Rs 900 a month is added as taxable perquisite in employee's hands. Further, any sale of assets (including company-owned car) by employer to employee is taxable in the hands of the employee. You probably need to understand in greater detail from the employer to arrive at the right position.