Alternative Assets | wealthymatters

Managing Capital Gains Taxes While Transferring Properties

January 26, 2014 1 Comment

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You cannot avoid tax on short-term capital gains. However, you can claim deductions to lower the tax liability on long-term gains.

Long-term capital gains from selling a house get tax exemption if they are invested in buying or building a new house. The new house has to be bought one year before the transfer of the first house or within two years after the sale. The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. When you buy a plot to build a house, the cost of land is included in the construction cost. Even buying an under-construction property entitles you to tax deduction, provided its construction is completed within three years of the transfer of the first property. If the new property is sold within three years of purchase or construction, the deduction is reversed and taxed as short-term capital gain.So if you purchase a new house for Rs 15 lakh and claim a deduction of Rs 10 lakh,the exempted amount will be deducted from the purchase cost for calculating the capital gain in the next three years (Rs 15 lakh-Rs 10 lakh). Now suppose you sell this house after two years for Rs 25 lakh. Your capital gain will be Rs 20 lakh (Rs 25 lakh-Rs 5 lakh), even though the actual appreciation is only Rs 10 lakh. If you buy an under-construction independent house and resume construction, the cost incurred in further construction will also be eligible for tax exemption under Section 54 of the Income Tax Act. Read more of this post

Filed under Alternative Assets, Tool Kit Tagged with Capital Gains Account Scheme (CGAS), captal gains tax on sale of farmland, investing sale proceeds of a house in a factory, long-term capital gains, postaday, real estate investment, section 54, section 54EC, section 54EC bonds, Section54F, short term capital gains, tax exemption, types of capital gains deposit accounts

Of Flipping And Taxes

January 26, 2014 Leave a comment

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Those who churn real estate investments fast,without planning and preparation, are likely to pay the highest tax. This is because if the property is sold within three years of purchase, the short-term capital gain is calculated by deducting from the sale price the cost of acquisition, the money spent on improving the property and the transfer cost.This gain is included in the taxable income for the year the money is received and taxed according to the person’s tax slab and can be calculated using free tax calculators.

An investment gone wrong will result in a short-term capital loss.Short-term loss from sale of a property can be set off against capital gain from any other short- or long term asset during the financial year.

The option of setting off short-term loss against capital gain is a big advantage here.It helps reduce tax outgo.If the current year’s capital gain is inadequate, the net capital loss can be carried forward for eight financial years for adjusting against any gain.

Filed under Alternative Assets, Tool Kit Tagged with carry forward loses, flipping properties, Investing in real estate, postaday, short term capital gains tax, short term capital loss, tax implications of flipping properties

Pawn Shops For The Rich

January 21, 2014 Leave a comment

wealthymatters The Suttons & Robertsons showrooms look like those of any high-end retailer or auction house: necklaces glittering with diamonds and emeralds fill the display cases, and sterling silver knives, forks and spoons sit on wooden tables fit for a monarch. In the private room in back are bigger, shinier versions of the jewels out front. High on a wall is a coat of arms bearing the likenesses of two lions, with the date of the company’s founding underneath: 1770. Only on closer inspection does it become clear that between the lions are three balls dangling from a hook: the international symbol for a pawnbroker.

This English company focuses on the blue-chip, wealthy crowd. With almost 250 years of experience in the exclusive world of high-end pawn, Suttons & Robertsons has now gone to the US to fill what it believes is a growing need among wealthy Americans who have spent beyond their means and need a quick — and quiet — infusion of cash in exchange for a few baubles they are willing, at least temporarily, to live without.They have the capital to lend up to and beyond $1 million. Read more of this post

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The Privileges Of PE Investors

January 19, 2014 2 Comments

wealthymatters Imagine an initial public offering of shares from company,promising an average 15% return after five years of listing if the market returns are not higher. The question that will arise is whether it is an equity issue or a bond issue. By any definition it could be inferred as a sale of fixed income security and not equity.

It is investment into securities with such properties that has been happening for years and masquerading as private equity. Last week the Reserve Bank of India yielded to the long pending demands of the foreign private equity investors that the central bank legitimize put and call options in an equity investment contract. But the industry is still unhappy.

The issue is that such derivative contracts are legal so long as there is no assured return. Private equity investors say that this puts them at a disadvantage. But isn’t every equity investor at the same disadvantage? Is it not risk taking that gives such out sized returns? Equity investments are the riskiest form of investment and one could lose to the last paisa. But there is also an opportunity to earn many times the principal investment. This is one reason why the Securities & Exchange Board of India insists on the disclaimer ‘equity investments are subject to market risk’ on any public communication about an IPO or a mutual fund scheme. If this is the kind of risk that the less financially literate take in equity investment, then private equity investors are indeed a privileged lot with the assurances of the mandatory return clause.This is a way of guaranteeing risk free high returns. Read more of this post

Filed under Alternative Assets, Paper Assets, Theory Tagged with derivative contracts, P/E, PE investing, postaday, Private Equity, put and call options, Redington India

The 3 Asses To Look For

December 27, 2013 Leave a comment

wealthymatters Yes, businesses can make you money.The hard way to get hold of a business is to build it.The easier or at least faster way to do so is to buy into a part or whole of a business at a sensible price.