Qurstion on Long Term Capital Gains

I have bought a piece of open plot in 2001 for a sum of 900000. Sold in 2011 for 12000000. At the time of selling the plot, I have a residential flat on my name another residential flat as joint owner with my wife. My question is, can i re-invest the capital gains in any other property so that I can avoid paying the tax. If no, How much I have to pay the tax. Please advise.

asked Sep 06 '11 at 13:43 by Srihari 165711


As you already own more than one residential house property, you cannot get tax benefit as per section 54F.

But you can save come tax by investing into capital gain bonds u/s 54EC. Maximum investment or Rs 50 lacs can be made in it in a financial year.

Below is your gains and income tax computation:

Purchase Year = 2001-02
Purchase Cost = 900000
Cost Inflation Index (CII) for purchase year = 426

Sale Year = 2011-12
Selling price = 12000000
CII for sale year = 785

Indexed Purchase price = 900000 x (785/426) = 1658451
Long term capital gain = 12000000 - 1658451 = 10341549
Income tax on capital gain = 10341549 x 20% = 2068309.8

answered Sep 06 '11 at 17:23 by pankaj 5.2k320

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Thank you for quick reply. Please clarify the following. Based on your feedback, I can invest maximum of 50L into capital gain bonds u/s 54EC. By when aim supposed to investment? I mean can I invest before end of this finiancial year (March 2012) or do i have to buy these bonds immediately. Please confirm In that case, my tax liability will be 1068309.8 (20% of ((12000000-500000) - 1658451))). Please confirm By when aim I suppose to pay my tax liability. I mean can i pay in the month of March 2012 or do i need to pay immediately. Please confirm
(Sep 06 '11 at 17:49) Srihari
Investment in capital gain bonds has to be done within six months of old asset sale. New tax liability will be adjusted proportionality: 20% of (total LTCG - (total LTCG * amount invested/total sale consideration)) = 20% of (10341549 - (10341549 x (5000000/12000000) = 20% of 6032570 = Rs 1206514 You will have to pay tax liability before 31st March, 2012. It has been assumed that you sold property in FY 2011-12.
(Sep 06 '11 at 17:59) pankaj
I'm planning to sell a flat and wanted to understand what are the implications in terms of capatial gains. This property is more than three years old and it is on joint name. The property is on mine and as well as on my wife name. We bought at 3000000 and intend to sell at 6000000. Which means a gain of 30L. Can me and wife can share the profit of 15L each? Do I have to pay 20% tax on this 30L. If not what is the option i have to save the tax. I have another residential property on my name where aim currently staying. Please let us know the options we are left with.
(Dec 07 '11 at 10:53) Srihari
Capital gains won't be 30 lacs, but amount much less that that. You need to compute with following method: 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 This gain would be divided in same ratio as ownership of flat. If you and your wife own 50-50, then gains would also be divided in same portion.
(Dec 12 '11 at 19:56) pankaj
Each of you have to either pay 20% income tax on your share of gains (say 12L each) or invest into new residential house property u/s 54 or invest into capital gain bonds u/s 54EC. Either you both can buy a single house in joint names with total cost more than total gains, or two houses single owned with each costing more than individual gain.
(Dec 12 '11 at 19:56) pankaj

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Asked: Sep 06 '11 at 13:43

Seen: 2,010 times

Last updated: Jan 21 '12 at 23:50