Capital Gain Tax — Selling Home (Flat)

POSTED BY rajasekhar ON November 11, 2012 10:18 pm COMMENTS (8)

Hi,

 

My father bought a apartment flat with 3.2 Laks (3.6 Laks with Registration) in 2005. Now he wants to sell it with 6.5 Laks. How much he has to pay capital gain tax?

 

Thanks,

Raj

8 replies on this article “Capital Gain Tax — Selling Home (Flat)”

  1. Dear Raj, the calculation done by you is wrong for the factg that purchase price of your father is 3.6L Rs. & not 3.2L Rs. as you were considering. the cost of registration ‘ll also be considered while calculating the purchase price.

    so your indexed purchase price = 617000 Rs. (rounded off)
    Sell price = 650000
    Indexed LTCG = 33000 Rs.

    Tax on LTCG @ 20.6% = 6798 Rs. only

    If he want to save this tax liability, he may do so by investing in LTCG saving bonds of NHAI & REC.

    Thanks

    Ashal

  2. bemoneyaware says:

    Any expenditure incurred in connection with such purchase, exchange or other transaction eg. brokerage paid, registration charges and legal expenses etc.., also forms part
    of cost of acquisition.

  3. rajasekhar says:

    Hi,

    What if he sell house with 5.4 Laks ? ( Purchase Indexed Cost:548571.43 )

    Thanks,
    Raj

    1. bemoneyaware says:

      A very good question.
      If he sold the house at indexed price which is less than sale price then he would have a capital loss instead of capital gain. This is a detailed topic by itself and summary of it I shall try to capture here:

      Loss again has to be separated into Short term Capital Loss (STCL) and long term capital loss (LTCL)
      Short Term Loss one can adjust. Loss from transfer of a short term Capital Asset can be set off against gain from transfer of any other capital asset (Long Term or Short Term) in the same year.
      Loss from transfer of a Long term Capital Asset can be set off against gain from transfer of any other long term Capital Asset in the same year If there is a net loss under the head “Capital Gains” for an assessment year, the same cannot be set off against any other head of income viz., Salaries, House Property, Business or Profession or other sources.

      It can be carried forward to next assessment year. In the next year,the STCL can be set off against any gains from transfer of any capital asset (Long term or Short term) and the LTCL can be set off against gains from transfer of long term capital asset
      only. Any unabsorbed loss after such set off can be further carried forward to next assessment year. Capital loss computed in an assessment year can be
      carried forward for eight assessment years and set off as above.
      Our article Basics of Capital Gain talks about it. But would need to write another one in detail. Thanks for giving us idea.

  4. rajasekhar says:

    Hi,

    Thanks for the valuable Info. When i calculated Capital Gains using Capital Gain Calculator, I got below info.

    Investment Type:Real Estate

    Time between :7 years 154 days

    Gain Type: Long Term Capital Gain

    Difference between sale and purchase price: 330000

    CII of the Purchase Year: 2005 month: Jul : 497

    CII of the Sale Year: 2012 month: Dec : 852

    Purchase Indexed Cost:548571.43

    Difference between sale and indexed purchase price: 101428.57

    Long Term Capital Gain with indexation:20285.71

    So how much tax my father has to pay? Above you mentioned that he can claim expenses also. What are expenses he can claim ?

    Thanks,
    Raj

    1. bemoneyaware says:

      Tax would come under the category long term capital gains(other categories for paying tax are salary, income from other sources like interest on Fixed Deposit)
      From calculations:
      CII of the Purchase Year: 2005 month: Jul : 497
      CII of the Sale Year: 2012 month: Dec : 852
      Purchase Indexed Cost:548571.43
      Difference between sale and indexed purchase price: 101428.57
      Long term capital gain on Real estate = 20% of Difference between sale and indexed purchase price
      So Long Term Capital Gain with indexation:20285.71.
      This is the tax he has to pay.

      Ex of tax calculation:
      Total Income of a resident individual is Rs.2,28,000 and it consists only of LTCG
      Total LTCG 2,28,000
      LESS : Basic exemption 1,50,000
      78,000
      Tax on Rs. 78,000 @ 20% 15,600

      Another Ex:
      The total income of a resident individual is Rs.2,10,000 including LTCG Rs. 50,000.
      Total Income 2,10,000
      Less: LTCG treated separately 50,000
      Total Income 1,60,000
      Tax on income excluding LTCG 1,000
      Tax on LTCG (20% of Rs. 50,000) 10,000
      Total Tax Payable 11,000

  5. bemoneyaware says:

    Like most other earnings when you sell your house, you are liable to pay tax.As Real estate is regarded as an asset, so the profit from its sale is also assessed under the head ‘Capital gains’ Quoting from our article : On selling house

    For Real Estate the computation of capital gains are as follows:

    If a property is sold within three years of buying it, it is treated as a short-term capital gain. This is added to the total income and taxed according to the slab rate.
    If a property is sold after three years from the date of purchase, the profit is treated as a long-term capital gain and is taxed at 20% after indexation .
    While you can avail of various tax exemptions in case of long-term capital gains, no such benefit is provided for short-term ones.
    The indexed price is calculated as = Purchase price x (CII for year of sale / CII for year of purchase).

    LTCG = Sale proceeds – (Indexed cost of acquiring + indexed cost of making improvements + selling expenses).
    Using our capital gain calculator

    As you property bought in 2005 it is more than 3 years and LTCG applies. But to find exact gain use CII of FY 2004-2005 if sold before Mar 31 2005 and CII of FY 2005-06 is sold after 1 Apr 2005.
    You can also claim expenses.

    1. rajasekhar says:

      Hi,

      Thanks for the valuable Info. When i calculated Capital Gains using Capital Gain Calculator, I got below info.

      Investment Type:Real Estate

      Time between :7 years 154 days

      Gain Type: Long Term Capital Gain

      Difference between sale and purchase price: 330000

      CII of the Purchase Year: 2005 month: Jul : 497

      CII of the Sale Year: 2012 month: Dec : 852

      Purchase Indexed Cost:548571.43

      Difference between sale and indexed purchase price: 101428.57

      Long Term Capital Gain with indexation:20285.71

      So how much tax my father has to pay? Above you mentioned that he can claim expenses also. What are those expenses ?

      What if he sell house with 5.4 Laks ? ( Purchase Indexed Cost:548571.43 )

      Thanks,
      Raj

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