How to save capital gain tax in case of senior citizen

Hi, My father sold a house last year for 12lacs. Since i had contributed majority of the construction cost, he wants to help me now as i am planning buy a flat. Is there any rebates on capital gains for senior citizen who don't have any other income? If not, can we save this tax buy somehow showing that he has contributed in the new property? I will have to keep the new property in my name as then only we'll be able to get the loan. Can be buy the new property jointly to save the tax but will i be able to borrow loan from the bank?

Thanks in advance, Ashish

asked Jul 27 '11 at 03:02 by aktvds 1112


First, income tax exemption will depend on whether the gains are short term or long term.

In case, the house has been sold by your father before end of three years of ownership, it will be considered as short term gain and whole gain will be added to your father's taxable income. No exemption is available on short term gains.

In case its a long term gain (house kept for more than three years), then first capital gains will have to be computed with indexation rules.

Below is an sample computation:

Purchase Year = A
Purchase Cost = P
Cost Inflation Index (CII) for purchase year = X

Sale Year = B
Selling price = Q
CII for sale year = Y

Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%

Now, in order to save this 20% tax fully, under section 54, your father can buy another residential property (single owned or jointly) with his share of cost more than long term gains (S).

Few more points:

  1. In case your father's income does not have any other income and gains fall below taxable slab limits applicable to your father, then also no income tax is payable. If its more than that, difference amount will be taxable @ 20%.
  2. As per section 54, if he wants income tax deduction, new property must be in his name. It can be jointly owned by you and your father, but cost of his share of ownership should be more than capital gains.

answered Jul 27 '11 at 18:16 by pankaj 5.2k320

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Thanks for the response Pankaj, however the house wasn't purchased rather built by us that too in multiple intervals. So, in this case should we calculate three years from the purchase of the plot or the date when we started living into the house? Secondly, where can I find out the CIIs for calculation? Besides, can he save this tax by investing in some long term deposits and funds instead of buying a property? Thanks again.
(Jul 28 '11 at 21:57) aktvds
If it was built, all construction costs and years will be needed to compute long term gains. three years would start from purchase of plot still. You can see CII for previous years here: http://answers.pankajbatra.com/2011/01/cost-inflation-index-cii-1981-2011-long-term-capital-gain/ for 2011-12 its 785. income tax can also be saved by investing into capital gain bonds for three years (u/s 54F).
(Jul 29 '11 at 18:41) pankaj

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Asked: Jul 27 '11 at 03:02

Seen: 8,455 times

Last updated: Jul 29 '11 at 18:41