No rollover exemption is granted on short-term capital gains

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In 2019, I sold residential land that I bought in 2006. All of the proceeds from the sale were reinvested in a residential apartment that I bought in 2020. I want to sell this apartment as soon as possible . What will the capital gains tax be and can I save tax by reinvesting the profits in another property?

—Name hidden on request

We assumed that the capital gains resulting from the sale of the residential land were exempt from tax under Section 54F of the Income Tax Act.

In accordance with the provisions of article 54F, when the new asset, that is to say the apartment purchased in 2020, is transferred by you after a period of two years from the date of its acquisition, the amount of the capital gain will be taxable as long-term capital gains (LTCG) in the tax year in which it is transferred, and you will have to pay applicable income tax accordingly. Capital gains tax exemption can be sought in one of the following ways: by investing the LTCG in a new residential house located in India; by investing LTCG in specified bonds or by investing net consideration in shares of a qualifying startup. If the apartment is sold within 24 months of the acquisition date, the capital gains from the sale would be taxable as short-term capital gains at the rates applicable to the slab (plus the surcharge , if applicable, and the study tax). No rollover exemption is available against STCG.

I have had a public provident fund (PPF) account with the Central Bank of India since 2000. I have extended it for five years, which ended in March 2020. Due to covid restrictions, I couldn’t extend it for five years until March, but want to do it now. Can I extend this PPF account for an additional five years? If so, what is the process? If not, can I keep the accumulated surplus in my existing PPF account and earn interest without contributing? Or will I have to close and withdraw all the money?

—Ingrid Ferrao

Given the covid-19 situation, we advise you to check with your bank for any waiver or extension of the duration of PPF accounts. In addition, in accordance with the provisions of the PPF regime, at the end of any blocking period of five years, the PPF account holder may continue to hold the account without further deposits and the account will continue to earn interest until it is closed. .

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India.

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