Your queries on capital gains answered

ou have a question about house rent allowance, medical allowance, or even a general tax query.

Here's where we step in with our experts, Relax With Tax.

Got a question for Relax With Tax? Please write to us!  

In April 2005 I bought an apartment in Bangalore for which construction will be completed in March 2006.

I have moved to Noida and want to sell the apartment. Can I avoid tax by buying property in Noida?

- Navin Bishnoi

When you sell any asset you own (house, land, shares, mutual fund units, gold, debentures, bonds) and you make a profit on the sale, it is known as capital gain. The tax you pay on this profit is called the capital gains tax.

Short-term capital gain: If you sell the asset within 36 months from the date of purchase (12 months for shares or mutual funds)

Long-term capital gain: If you sell the asset after 36 months from the date of purchase (12 months for shares or mutual funds)

Apparently, the asset (your home) seems to be a short-term asset (holding period of less than 36 months). Hence no exemption would be available to you on sale of the property.

Accordingly, it does not matter if you reinvest it in a property in Noida or not, as no tax exemption is available.

To understand how capital gains is calculated and the tax impact, read All about capital gains.

I have stock options which I have not purchased but were granted to me under the Employee Stock Option Plan.

If I sell the shares after a year, will long-term capital gains apply though I have not paid for them?

- Rakesh

To understand what is long-term and short-term capital gain, read the above answer.

The timeframe between the allotment and the sale/transfer is critical in determining whether the ESOP is a long/short term asset.

If this timeframe is in excess of 12 months, then your ESOP is definitely a long-term asset and not a short term one.

• 10 things you must know about ESOPs

How is the perquisite value of company-leased accommodation calculated for a house in Mumbai?

What is the tax implication of taking a company leased accommodation versus HRA?

- Soods

The perquisite value of company-leased accommodation in Mumbai would be 10% of salary during the period which the accommodation is occupied by the employee.

Salary = Basic + Dearness Allowance + Bonus + Commission + Fees + Any other taxable allowance.

House Rent Allowance exemption is computed by comparing 50% of the salary, HRA received and rent paid in excess of 10% of salary.

Of these three, the lowest amount is considered as HRA exemption.

You would need to draw up this comparison and see which alternative provides the best tax benefit.

• Your queries on HRA answered

I am leaving my current company and will have to pay a certain sum to them. Can I get a tax deduction on this amount?

- Varun S

Apparently you are referring to the notice period payout that an employee needs to pay to the employer in case of leaving without serving the notice period.

This payout does not enjoy any deduction from your income for two reasons.

1. It is merely an application of your income.

2. It is a payment for not fulfilling an agreed employment condition.

Got a question for Relax With Tax? Please write to us!