Taxation: Homi Mistry

I sold a property for Rs 3 crore. My chartered accountant says I will be taxed at 20 per cent with indexation. But tax can also be computed without it. Can the proceeds be indexed? If yes, why? How does one ascertain if the computed tax will be indexed?
The cost of acquisition (COA) can be indexed in a long-term capital asset. It will be classified as one if it is held over 3 years. And, it will be taxed at 20 per cent after indexation. The option of not indexing the COA is available only in the case of long-term capital assets being listed as securities or units or zero coupon bonds. This option is not available for property.

However, if you have sold the property in less than 3 years, the gain would be short-term capital gains and these have to be taxed at the tax rate applicable depending on other income, and indexation of COA will not be available.

How is the taxability on the cumulative option of the non-convertible debentures (NCDs) calculated? The tax on NCDs is paid on the accrued interest for every financial year. If these are held for some years and sold on the stock exchange, will there be double taxation?
The interest will be taxed as 'income from the other sources', either on accrual or cash basis, depending upon the method of accounting followed for recognising income from the other sources.

If you decide to sell through the stock exchange, it will be treated as a long-term capital asset, if held more than 12 months immediately preceding the date of sale. The long-term capital gains will be taxed at 10 per cent, without the indexation of cost. And, if you sell within 12 months, the same would be short-term capital gains.

The writer is a tax partner at Deloitte, Haskins & Sells. The views expressed are his own. Send your queries to yourmoney@bsmail.in