Hello Fellows,


Can some body share information on Captial gain and TAX. If possible do share, how should be it use, where can the money from Captial gain tax be used. How is the interest applicable.. Please do share, more information
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  • Stil some Doubt

    Dear Friend

    Thanks. i come to know much but by the simple example, i want to understand one thing.

    I purchaed a house in 2010 in Rs. 1000000
    I Sold after 4 year in 2014 in Rs. 2500000
    Gain = Rs. 1500000 (long term)
    After Cost Inflation indexation the Gain becomes Rs. 1300000

    So for saving capital Gain Tax whether i need to invest Rs. 13 Lacs or Rs. 25 Lacs in new house??????

    When i purchased the house in 10 Lacs, addition to this i spend money in Transfer, Registry, loan sanction etc. which is around 1 lac. and for some renovation purpose i spend 1 Lac more in Cash. so the cost becomes 12 lac. So can i consider my buying in 12 lacs????

    Originally Posted by realacres
    Hi yatin,

    Here are some details for the same:-

    A capital gain is income derived from the sale of an investment, here a house. Capital Asset means all moveable or immovable property except trading goods, personal effects, agricultural land other than within municipal areas or within 8 kilometers from it wherever notified.

    These are of 2 types, short term & long term;

    Long-term capital assets are assets held for more than 36 months before they are sold or transferred. Different rates of tax apply for gains on transfer of the long term and short-term capital assets. Gains on short-term capital asset are taxed as regular income.

    The tax on short term capital gains tax is 30% while that for long term (min of 36 months) is 20%.



    However, these tax can be avoided by doing the following:-

      Purchase of new flat in 2 years from the date of sale deed of your earlier property,
      In case you buy a land & then decide to build, the tenure is extended to 3 years from the sale deed,
      Investing in NABARD or Rural electrification bonds for a period of 3 years.
      For 1./2., you need to open a Capital Gains Tax account which is available in only PSU banks. All the money earned on account of sale of this property is kept here & FD is done based on your requirement.

      This money can later be withdrawn only after furbishing the required documents of purchase of new house to the bank. If you fail to purchase a new property in the stipulated time period, the capital gains tax will be charged:D.

      However, note that this facility is appicable only for a person who doesn't has more than 2 homes in his/her names (read self use):). Hence, investors who buy multiple flats are devoid of this benefit:D & that's the reason they ask B-money to avoid this tax.

      Hope I answered your queries. If anything more, do post it here.
    CommentQuote
  • InvestoRahul
    12 lakhs is the amunt you need to invest for saving capital gains tax.
    Amount can be reduced for expedniture incurred in conection with purchase of asset.
    But for safe side 12 lakhs is the best amount.

    Mountin king,
    In my opinon you cannot save LTCG.
    However tax consultants are better placed to advice you.
    CommentQuote
  • Mr. Vaibhav..
    Thanks for Reply..

    My Question might be misunderstood by you.


    in 2010 i bought house in 10 lacs but my immediate expences in cash for repair, transfer, Registry etc. was 2 lacs. so for the calclulation of capital gains, how much amount i need to consider as purchased price 10 lacs or 12 lacs???

    2nd Question : I sold this property today in 25 lacw and by any mean i calulated my Long Term capital gain 13 Lacs.

    to avoid tax, should i invest 13 lacs or 25 lacs in new property??

    Rahul Gurgaon

    Originally Posted by vaibav123
    InvestoRahul
    12 lakhs is the amunt you need to invest for saving capital gains tax.
    Amount can be reduced for expedniture incurred in conection with purchase of asset.
    But for safe side 12 lakhs is the best amount.

    Mountin king,
    In my opinon you cannot save LTCG.
    However tax consultants are better placed to advice you.
    CommentQuote
  • Investorahul,
    I have not misunderstood your question.
    Expenditure on transfer
    like transfer charges, can be taken into account.but repairs will be questionable.
    Repairs gives scope for IT officer to question-has the rpair been of substantial nature,has it added value etc.Therefore repair chatrges should be included for capital gains tax carefully or avoided if possible.
    The word is capital gains tax
    Tax is paid on capital gains after indexation.
    Therefore I repeat 12 lakhs is the amount to be invested.
    For your satisfaction check with consulatant/CA
    CommentQuote
  • Thanks Vaibav123
    CommentQuote
  • The best thing would be consult your CA.
    Having said that, you can simply put the money in capital gains tax account in PSU bank (BoB preferred) for lock-in period of 3 years & you will get interest rates as per prevailing FD rates. This will save you from hassle of buying new property & also save on capital gains tax.
    CommentQuote
  • I am Sorry to Repeat my Question for Some more Clarification as i am getting Confused..
    May 2010 : purchased a House in Gr. Noida. Agreement of 9.5 Lacs (Loan of 8 Lacs from LIC housing)
    Spent some money in Tranfer, Registry, improvement in house : About 1 Lacs

    Apr 2014 : Sold this house. Agreement of 27 Lacs. (Preclosure of previous loan 6 Lacs paid to LIC HOusing)

    Want to Purchase a underconstruction Multistorey Apartment Cost Apprx 20-27 lacs in which Construction to be finished before Dec 2014.

    How much should I give from MyPocket to Avoid capital Gain Tax?(Rest i want to pay by taking Home Loan). How much Priced property should i Consider for Buying?

    QUOTE=vaibav123;1117426]Investorahul,
    I have not misunderstood your question.
    Expenditure on transfer
    like transfer charges, can be taken into account.but repairs will be questionable.
    Repairs gives scope for IT officer to question-has the rpair been of substantial nature,has it added value etc.Therefore repair chatrges should be included for capital gains tax carefully or avoided if possible.
    The word is capital gains tax
    Tax is paid on capital gains after indexation.
    Therefore I repeat 12 lakhs is the amount to be invested.
    For your satisfaction check with consulatant/CA
    CommentQuote
  • In my scenario...

    I purchased a residential property in 2006 for 20L.

    I am selling this residential property in 2014 for 60L.

    I would like to know what would be my Capital gain tax for this property.

    After I sell this property, can I buy commercial property like Shop or Office space around 80-90L? Will those extra profit earned (40L) would be invested under commercial property.

    Appreciate your help....
    CommentQuote
  • Originally Posted by pareshdg
    In my scenario...

    I purchased a residential property in 2006 for 20L.

    I am selling this residential property in 2014 for 60L.

    I would like to know what would be my Capital gain tax for this property.

    After I sell this property, can I buy commercial property like Shop or Office space around 80-90L? Will those extra profit earned (40L) would be invested under commercial property.

    Appreciate your help....


    Hello pareshdg,

    How to calculate capital gains tax on sale of property - this might be able to help you.

    How to compute long & short-term capital gains - Economic Times

    Here is the indexation table. It represents erosion of value due to inflation. IMHO, It does not represent real picture of consumer inflation, as far as I understand. The values here are lower than real inflation. If they would put real inflation, then govt would lose tax revenue.

    Cost Inflation Index Chart - Capital Gain 1981 - 2014

    Not sure whether you can buy commercial property - I guess it is yes.

    Hello investoRahul,

    I believe you should use all of it. Say you bought for 10L, sold for 25L. Your gain is 15L.
    If you use only 10L from your gain to buy another property, then your net gain is 5L and you will have to pay LTCG tax on that 5L, after indexation.

    Experts, please confirm.
    CommentQuote
  • Originally Posted by pareshdg
    In my scenario...

    I purchased a residential property in 2006 for 20L.

    I am selling this residential property in 2014 for 60L.

    I would like to know what would be my Capital gain tax for this property.

    Sat234 has given some good details, please go through it. Also check this link :-

    Saving capital gain tax on sale of property | Business Standard

    After I sell this property, can I buy commercial property like Shop or Office space around 80-90L? Will those extra profit earned (40L) would be invested under commercial property.

    Appreciate your help....

    First of all, profit won't be 40L but much lesser than it as inflation is also considered while arriving at CGT figs. Though not completely sure, but you can't buy commercial space from this amount. The entire money needs to go towards buying a house only or put the money in CGT a/c in PSU bank, but upper limit is 50L.
    CommentQuote
  • Originally Posted by realacres
    Sat234 has given some good details, please go through it. Also check this link :-

    Saving capital gain tax on sale of property | Business Standard


    First of all, profit won't be 40L but much lesser than it as inflation is also considered while arriving at CGT figs. Though not completely sure, but you can't buy commercial space from this amount. The entire money needs to go towards buying a house only or put the money in CGT a/c in PSU bank, but upper limit is 50L.



    Thanks a lot realacres and Sat234 for your valuable inputs.

    All of my doubts are clear now. Appreciate your help!!!!
    CommentQuote
  • pareshdg,
    Check out index values on year of purchase and year of sale.
    2006-07 =519
    2014-15 value is not known to me (probably not announced yet)
    value will be 20*2014 value /519
    Then work out the gain which you have to invest.
    Tax is to be paid on Capital gains only.
    Money cannot be used to buy commercial property.
    As pointed out other learned members,upto rs 50 lakhs can be invested in NHAI bnods or REC bonds-check out as to which issue is open presently.
    CommentQuote
  • Thanks RealAcres, Vaibhav123,

    After reading Vaibhav123's reply, I think I have got it wrong. Please correct me.

    An example - A person bought a home for 10L in FY 2009-2010. Sells it for 30L in FY 2013-2014. As per the indexation table,
    value today = 14.85L (10L * 939/632) (rounded).
    So the person must reinvest 15.15L (30L - 14.85L ) to avoid LTCG tax. Or should the person invest all 20L (30L - 10L). I believe it is the former.
    CommentQuote
  • Sat234,
    Person must invest 15.15 lakhs.
    Purpose of indexation is to know the current value of the property in terms of index.
    Value was 10 few years ago now it is 14.85 as per index,you have sold it at 30 lakhs,so your LTCG is 30-14.85= 15.15.
    CommentQuote