Can I save Long term capital gain

Sir we have house in Delhi in joint name my name is first, which was purchased in the year 1998. We are not living in that flat, but we have given that flat on rent. I am staying in Jaipur for last more than 10 years in rented flat due to my service. Now want to sell that flat and purcahse other one in jaipur. The mkt value of the house is Rs 85 lacs. The house which I want to purchase is around 55 lacs and remaining amount in Govt Bonds. Can I save LTCG in this and How. There is vacant plot in my wife’s name.

asked Aug 31 '11 at 12:36 by dhaddha 1111


First, you would need to compute long term capital gains from old house sale. Below is an indicative computation:

Purchase Year = 1998-99
Purchase Cost = P
Cost Inflation Index (CII) for purchase year = 351

Sale Year = 2011-12
Selling price = 8500000
CII for sale year = 785

Indexed Purchase price = P x (785/351) = R
Long term capital gain = 8500000 - R = S
Income tax on capital gain = S x 20%

As old house was jointly owned, capital gains computed above (S) would be divided among owners (you and your wife) in same ratio as ownership. Assuming 50-50 ownership, each one will have S/2 gain.

As per section 54, To save income tax fully a new house can be purchased or built with cost more than long term gains. If new house is purchased jointly and costs more than S, no income would be payable. You may even go for buying two houses (one each at your and your wife's name) each costing more than S/2.

Possession and registration of new house should be done in time interval of one year before and two years after sale of old house.

Income tax on capital gains can also be saved by investing into Capital gain bonds under section 54EC. Max investment limit under these are 50 lacs per financial year.

answered Aug 31 '11 at 20:55 by pankaj 5.2k320

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Asked: Aug 31 '11 at 12:36

Seen: 1,392 times

Last updated: Aug 31 '11 at 20:55