Have you planned your capital gains tax?

                                Have you planned your capital gains tax?
 
 
Individuals who have to file their tax returns this month still have time to save on capital gains tax in case a house was sold in the financial year 2015-16, generating gains
The deadline for filing your income tax returns for the financial year 2015-16 is approaching. An individual who has sold a house during the financial year 2015-16 can still save on the capital gains tax livable. Capital gains tax arises in case you sell your property at a price above the cost you acquired it at. The cost is not the actual price paid to acquire the property. Here, it means the indexed cost, arrived at after applying the indexation factor to the cost of the property as well as any improvements made to it by the owner.
The amount of capital gains earned is arrived at by applying the Cost Inflation Index. This Index is published by the Income Tax Department. The present worth of a property is arrived at by applying the Cost Inflation Index to the cost of the property as well as any improvements made to it. This amount is deducted from the consideration amount received by the transferor from the transferee. This gives the capital gains earned.
The portion of capital gains that is not appropriated by an individual towards the purchase of another property should be deposited in a specified bank account. A deduction against this amount can be claimed only in case it is deposited in a `Capital Gains Account Scheme’ before the due date for filing of income tax returns. The account can be opened with any nationalized bank. The scheme is called `Capital Gains Account Scheme, 1988′. The scheme is applicable to all who have earned capital gains. The deposit may be made in one lump sum or in installments a any time.
As it normally takes a bank 2-3 days to open this account, you should plan in advance and open the account early rather than wait for the last minute.
 
Under the scheme there can be two types of accounts:
DEPOSIT ACCOUNT A
This account is in the nature of a savings bank account. Withdrawals may be made from the account from time to time subject to other conditions of the scheme. This account is suitable for individuals who are planning to construct a house over a period of time.
DEPOSIT ACCOUNT B
This account is in the nature of a term deposit which is payable after a fixed period of time. The interest earned on the deposit may either be withdrawn periodically or reinvested.
PROCESS TO OPEN ACCOUNT
In order to open the account, you must fill up the prescribed application form in duplicate. Further, the type of account A or B is to be specified. In case of Deposit Account B, it has to be specified whether the account is to be cumulative or non-cumulative. You need to attach a photograph, ID and address proof along with the application.
It is to be noted that only the amount of capital gains earned in the transaction are to be deposited in a capital gains account and not the complete sale consideration received on sale of a property. The details of capital gains account opened should be disclosed in the income tax returns.
STATUS OF CAPITAL GAINS
The amount deposited can be used to buy or construct a house. In case the amount deposited is not used entirely or partly for the purchase or construction of a house within the stipulated time, the unused amount will be charged as income of the previous year in which the period of three years from the date of transfer of the house expires.
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