Mutual Fund
Suresh Aggarwal: I redeemed the units of a mutual fund as it was not doing
well and want to invest in another fund. Should I make a lump sum payment
or go for a systematic transfer plan (STP)? I have already invested in equities.
Sanjiv Singhal, Founder and COO of Scripbox, replies:
If you are already in equities, you should change funds within the same asset
class and go for lump sum investing. Opting for STP usually means you are look-
ing to change the asset class from equity to cash for a few months and the money
will be there in your bank account or liquid fund.
Taxation
Sheetal Kadam: After my father’s
death, my mother inherited a flat, and
we sold it in February 2019. The flat
was in a redeveloped building, with
a carpet area of 225 sq. ft. But it was
originally (in 2001) a 100 sq. ft chawl
room. We got possession in 2008 and
an agreement was made in 2014. So,
what is the nature of this property
now – should we consider this as a
chawl room or a redeveloped flat?
What will be the fair market value or
should we consider the index cost of
2001? If it is considered a chawl room,
capital gains will be more and the tax
will be higher.
Amit Maheshwari, Partner, Ashok
Maheshwary & Associates, replies:
Property transfer for the purpose of
calculating capital gains under the
Income Tax Act, 1961, includes ex-
change, and in your case, the flat re-
ceived in exchange for the old chawl
room will be considered a transfer,
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help you resolve any issue.thus attracting capital gains tax.
Hence, you were liable to pay capital
gains tax on such a transaction in the
year of such exchange – it means when
you gave your old chawl room for the
construction of a flat. But such capital
gains are exempt under Section 54 if
the money received from the sale of the
old house is invested for the purchase
of another within two years from the
date of transfer or for construction of
a new house within three years of the
sale. In your process of exchange, the
condition of investing in a new house
was met. Hence, your capital gains
would have been exempt at the time of
such transaction.
The date of transfer of possession of
the chawl room will be considered the
date of its transfer, and the sales con-
sideration will be the fair market value
of the flat on the date of possession.
(Stamp duty value will not be consid-
ered as it seems no agreement had been
made on which stamp duty was paid,
while the provision for considering as-sessable stamp duty value became effec-
tive from October 1, 2009.
For the new flat sold in February
2019, capital gains will be calculated
by deducting the index cost of acquisi-
tion of such a flat from the sale amount
received by you. The sale consideration
at the time of transfer of the old chawl
room will be considered the cost of ac-
quisition at the time of exchange, and
such cost will be indexed by multiply-
ing it with the Cost Inflation Index
(CII) of the year of sale and then divid-
ing it by CII of the year of purchase.Life Insurance
Arvind Bhatnagar: I am a 32-year-
old married man with a three-year-
old daughter. As of now, I only have a
`5 lakh endowment plan. Will a term
plan of ` 1 crore be adequate for us?Anjali Malhotra, Chief Customer,
Marketing and Digital Officer, Aviva
Life Insurance, replies:
You have made the right decision as
term plans offer life cover at the lowest
cost. But decide on the amount care-
fully as the life cover should be able to
take care of the family’s financial needs
in case anything happens to you. The
amount should be 10 times the annual
income of the main earner. But require-
ments always vary, and you should cal-
culate the amount needed, based on
your income, assets and liabilities.Please send your queries to
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