Capital Gains Tax For Property - What Are the Rules?
November 29, 2004
By Srinidhi Goenka
The sale of property is also liable to capital gains
tax. This property, which has not been used for residential
purposes, can either be a business asset or a non-business
asset. The capital gains tax for property differs
in both scenarios.
There are several situations, however, which can
create confusion in the mind of the seller. A few
such answers to help you correctly determine the capital
gains tax for your property have been provided in
this article.
Non-Residential Property - Tax Rules
If you own a non-residential property, and you have let it out
as a business, then what tax do you have to pay ? Normally, a let
property is considered to be a non-business asset. It is considered
to be a property used for trading purposes. A few examples are given
below to make you understand this better.
· You are the owner of the property of a supermarket which
has been let out to a listed company for trade. You are not an
employee of the company and you also do not hold 5% of the votes.
Thus, you are not liable to pay capital gains tax on it.
· You are the owner of a warehouse. You have let it out
to a partnership firm, of which you are not a member. It is being
used for trading. After 6 April 2004, this warehouse is a business
asset.
· You purchased a factory building in December 2000. You
sold it in April 2004. During the period of your ownership, you
let it out to an unlisted trading company. The factory was being
used for trading. Now, even if you are not a shareholder in the
company, the factory is considered to be a qualifying company
for capital gains tax.
The rules which determine whether a property is considered to be
a business asset have been changed in recent years. It is important
for any property owner to understand these rules so that he can
pay his taxes as per law.
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