Harsh Bhuta

Chartered Accountant
Harsh is a Chartered Accountant with over 10 years of experience in the field of taxation advisory and corporate finance. He has represented several matters before the Income Tax Appellate Tribunal and the Commissioner of Income Tax Appeals. He regularly advises a number of top corporate houses, private equity investors and multinational companies on Income Tax and GST implications. He has also been actively involved in cross border structuring for private equity and strategic M&A transactions. He is a Partner at Bhuta Shah & Co LLP. Prior to joining Bhuta Shah & Co LLP, he was part of the Transaction Advisory team at Ernst & Young (EY). He started his career with PWC. Harsh is a CFA Charterholder and a fellow member of the Institute of Chartered Accountants of India, where he was placed amongst the top 30 rank holders in India in the CA Final Examinations

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Answered on November 09, 2017
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  • GST is levied on amount payable prior to the issuance of completion certificate. In case of supply of duly constructed property, no GST is payable.

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    Answered on November 09, 2017
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  • This is a very generic question. However, it would depend upon the facts of each case. Under the VAT regime, many States had introduced composition scheme with tax rates as low as 1%, without Input Tax Credit (ITC). There is no such composition scheme under the GST regime. At the same time, builders would be eligible to claim ITC on inputs/input services used in the execution of works contract...
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    Answered on November 09, 2017
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  • The liablity to pay service tax is on the service provideer (builder in this case). Service tax department cannot raise demand on the buyer of the property to pay service tax on behalf of the builder.

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    Answered on November 09, 2017
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  • According to Section 56(2) of the Income Tax Act, the gift of flat received by your daughter shall be exempt, as it is a gift received from relative. On registering the gift deed the stamp duty and registration fees needs to be paid. There will be no gift tax on the said transaction.

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    Answered on November 09, 2017
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  • If you invest the capital gain arising from the sale of residential flat in another residential flat then the provision of section 54 of Income Tax Act shall apply (i.e selling of one residential property and purchasing another residential property within within 1 year before or 2 years after the due date of transfer of the Property sold or construct a residential house property within a period...
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    Answered on November 09, 2017
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  • You can transfer your share to your wife by executing a gift deed. Further as the property is being gifted to wife (relative), there will be no tax liability under section 56 of the Income Tax Act. However stamp duty and registration charges needs to be paid in this case. If the gift deed is executed, any payment of rent received by your wife in respect of the said property will be clubbed in...
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    Answered on November 09, 2017
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  • Difference between sale consideration (16 lacs) and indexed purchase cost (5 lacs plus indexation) will be charged as capital gains. Since you are purchasing new residential property of Rs. 32 lacs, the entire capital gains will be exempt u/s. 54 of the Income Tax Act which is available on sale of residential property by investing in new residential property. For ther year under consideration, ...
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    Answered on November 09, 2017
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  • Yes. The capital gains arising from the sale of property after holding the same for 2 years is taxable as long term capital gains. Indexation will be availble on the purchase cost as the asset is long term capital assets.

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    Answered on November 09, 2017
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  • As your brother is selling land and is willing to acquire residential flat, he can claim the exemption under section 54F of the Income Tax Act which allows purchase of residential property against sale of any long term capital asset. If the cost of property purchased is higher than sale consideration of the land then entire capital gains will be exempt otherwise only proportionate gains will be...
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    Answered on November 09, 2017
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  • If you own both the properties, then the propety held by you in name of your wife in Goregaon is a Deemed Let Out Property (DLOP) in your income by applying clubbing provisions of Income Tax Act. The ideal way to purchase new property is to gift the amount of sale consideration to your wife and then she can purchase the property in her own name then the same can be considered as Self Occcupied ...
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    Answered on November 09, 2017
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  • The property is situtated in India and therefore capital gains tax will arise on this transaction. The buyer will have to deduct TDS as per provisions of section 195 of the Income Tax Act since you are NRI.

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    Answered on November 09, 2017
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  • In Maharashtra, VAT on sale of underconstructed property brought into effect from June 2006. Hence, builder would be liable to pay VAT on agreement to sale effected in Nov 2009. There are various methods for arriving at the taxable value of transfer of property in goods during construction. Liability to pay VAT by flat buyer to the builder would be dependent on the contractual arrangement betw...
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    Answered on November 09, 2017
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  • Interest on Housing loan will always be higher than what you earn on Fixed Deposit. Further interest earned on fixed deposit is subjected to income tax. By paying off the loan you will be saved on interest expense. So it is advisable to repay the loan (if the rate of interest is high on the loan in comparison to FD)

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    Answered on November 09, 2017
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  • To compute the amount of capital gain, you can refer to the provision of section 48 of the Income Tax Act. Based on the facts provided, as the property has been sold after a period of 24 months, the capital gains would be long term capital gains. Such capital gains would be computed as below: Difference between Sale consideration (Rs. 2.25 crore) and the indexed purchase consideration (Rs. 40,...
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    Answered on November 09, 2017
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  • Tax liability will arise on capital gains arising out of difference between sale consideration and purchase consideration. While the sale consideration will be proportionately divided by the area of the flat, the purchase value of your flat will be aggregate of the following:
    1. For 318 sq. ft - original purchase value as per agreement.
    2. For 100 sq. ft. received free of cost - NIL
    3. For 1...
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    Answered on November 09, 2017
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  • The sellers claim that he is a non-resident will not suffice. Residential status has to be detemined as per provisions of section 6 of the of Income Tax Act.
    Non Residential status: As per the provision
    i) if a person stays in India for less than 182 days in current year then he will be treated as a Non resident in India.
    ii) if a persons stay in India for more than 60 days but less than...
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    Answered on November 09, 2017
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  • If the said property is your ancestral property then the same is a property of HUF and you are co-owner to the same. However, if it is property of your father in his individual capacity then the most cost effective way is to make a gift deed and thereby transfer partial ownership as the gift so received will not taxable under the provisions of the Income Tax Act. The Stamp duty and registr...
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    Answered on November 09, 2017
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  • If you invest the capital gain arising from the sale of residential flat in another residential flat then the provision of section 54 of Income Tax Act shall apply (i.e selling of one residential property and purchasing another residential property within within 1 year before or 2 years after the due date of transfer of the Property sold or construct a residential house property within a period...
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    Answered on November 09, 2017
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  • The capital gains will arise in the year in which the land is transferred to JV. Exemption to the extent of Rs. 50,00,000/- will be available under section 54EC of the Income Tax Act provided you invest in specified bonds or under section 54EE of the Income Tax Act on investing in the units of specified start up funds as notified by central government within a period of six months from the date...
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    Answered on November 09, 2017
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  • Both the tax free bonds notified by Central Government currently i.e. NHAI and RECL have the same lock in period of 3 years and rate of interest of 5.25%. So the capital gains of Rs. 10.50 lakhs can be invested in any of the bonds to claim exemption under section 54EC of the Income Tax Act.

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    Answered on November 09, 2017
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  • There would be no capital gain tax if you sell the old residential flat and buy another residential flat as the capital gains can be claimed exempt u/s. 54 of the Income Tax Act. The exemption will be to the extent of investment in the new residential flat or the long term capital gains arising on sale of old flat, whichever is lower. If the investment is lower than the long term capital gains,...
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    Answered on November 09, 2017
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  • As per section 194IA of Income Tax Act, the transferee is required to deduct TDS @ 1% at the time of credit of sum to the account of the transferor or at the time of payment of such sum if the total consideration is 50 lakhs or above. The said section was introduced w.e.f 1st June, 2013. Accordingly any payment made by you on or after 1st June, 2013 and if your purchase consideration is more th...
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    Answered on November 09, 2017
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  • Since the Pune Flat is owned by your mother, capital gains will arise to your mother. By investing in another residential flat exemption u/s. 54 of the Income Tax Act can be claimed upto a value of subsequent purchase.
    Further the Mumbai flat can be purchased in joint ownership of your mother and father. Joint ownership will not have any impact on exemption that will be available to your mothe...
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    Answered on November 09, 2017
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  • In Maharashtra, VAT on sale of underconstructed property brought into effect from June 2006. Hence, builder would be liable to pay VAT on agreement to sale effected in June 2008. There are various methods for arriving at the taxable value of transfer of property in goods during construction. Libality to pay VAT by flat buyer to the builder would be dependent on the contractual arrangement betw...
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    Answered on November 09, 2017
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  • Tax liability will arise on capital gains arising out of difference between sale consideration and purchase consideration. The said gains will be considered as long term capital gains or short term capital gains based on the period of holding of the property. If the property is held by you for a period more than 24 months than the same will be long term else short term. Assuming that the sale w...
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    Answered on November 09, 2017
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  • VAT would be payable by the builder on flats allotted to land owners. Subsequently when the land owner sells flats to third party, no VAT would be paybable by the land owner on such subsequent sale.

    Construction of a complex, building, civil structure etc intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certi...
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    Answered on November 09, 2017
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  • Yes, tax liability will arise on capital gains arising out of difference between sale consideration and purchase consideration.

    As far as rate is concerned, tax will be computed @ 20% plus surcharge (if any) on long term capital asset held for more than 24 months. While tax rate will be 30% plus surcharge (if any) if the asset is a short term capital asset.

    As far as date of purchase is ...
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    Answered on November 09, 2017
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  • Tax liability will arise on capital gains arising out of difference between sale consideration and purchase consideration. The said gains will be considered as long term capital gains or short term capital gains based on the period of holding of the property. If the residential flat is held by you for a period more than 24 months than the same will be long term else short term. Indexation needs...
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    Answered on November 09, 2017
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  • In order to save tax on capital gains arising out of sale of residential flat, expemtion can be claimed under section 54 of Income Tax Act i.e selling of one residential property and buying another residential property within the time limit specified under section 54 of the Income Tax Act. The new residential property so purchased should be held by you for subsequent period of 3 years. In case ...
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    Answered on November 09, 2017
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  • Under scenario 1, if you sell your residential flat and invest the capital gain arising therefrom in another residential flat then the provisions of section 54 of Income Tax Act would apply i.e selling of one residential property and buying another residential property within the time limit specified under section 54 of the Income Tax Act will apply and capital gains so arised shall be exempted...
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    Answered on November 09, 2017
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  • It seems that your case very well fits within the provisions of section 54 of Income Tax Act i.e selling one residential property and buying another residential property within the time limit specified under section 54 of the Income Tax Act. Thus there will be no capital gain tax liability and you need not pay any taxes. Further the new residential property so purchased should be held by you su...
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    Answered on November 09, 2017
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  • It is permissible to gift the under construction property to your wife by way of a gift deed.

    Further as the property is being gifted to wife (relative), there will be no tax liability under section 56 of the Income Tax Act. However stamp duty and registration charges needs to be paid as per prevailing state laws.

    However clubbing provisions with regards to any income arising from the s...
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    Answered on November 09, 2017
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  • Tax burden can be reduced on capital gains arising on sale of residential property by claiming exemption under section 54 or 54EC or 54EE of the Income Tax Act by fulfilling the condition prescribed in the sections.

    Exemption u/s. 54 of the Income Tax Act can be claimed by investing the capital gains in purchase of new residential flat.

    Exemption of capital gains to the extent of Rs. 50...
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    Answered on November 09, 2017
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  • Stampy Duty and Registeration fees will depend on the stamp duty provisions of each State. For Maharashtra, the rates are as below:

    a) The stamp duty rate will be 5% of the agreement value or market value (computed as per the ready reckoner rate of the area), whichever is higher

    b) Registration fees will be 1% on the market value or the agreement C72value but restricted to Rs. 30,000.
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