Ltcg on income received in instalments in different FYs

Hi I had some non agricultural land purchased in 2006. In 2011 , I had an agreement with a builder A where I sold part of the land for 25lakh and for the remaining land he will give me a flat (somewhere in 2013, as it's under construction). The 25 lakh was given in two checks of 10 lakh dated 30th march 2011 (encashed on 31 st march 2011) and of 15 lakh dated 30 sept 2011 ( encashed on 10 oct 2011) . I have no other property in my name but I have paid an advance of 5 lakh for another flat to another bilder B in 2009 where I have to pay around 20 lakh more. My question is : 1. In the year ending march 2011 what will be my tax liability? 2. Will Paying some amount to builder B will help save tax and if yes , then till when? Thanks

asked Feb 04 '12 at 14:27 by Mads 111


Capital gains liability would come in year in which you would transfer land to builder's name through registered deed.

In 2006, you purchased land for say, X amount. In 2011, you sold whole land for 25 lakh + new flat cost, say Y. First you would need to compute capital gains from this sale of land using below method.

Purchase Year = 2006-07, Purchase Cost = X, Cost Inflation Index (CII) for purchase year = 519
Sale Year = 2011-12, Selling price = 25L+Y, CII for sale year = 785
Indexed Purchase price = X x (785/519) = R
Long term capital gain = 25L+Y - R = S

Now to save income tax on this S amount, you can buy another residential house property. As you would be getting flat on this land at cost Y. It can save you some part of income tax.

Invested Amount = Y
Non-exempted capital gains = S *(1-((25L+Y)/X)) = P
Income tax on non-exempted capital gains = P x 20%

If new flat B is costing more than Y and possession is received within two years from sale of land, you may also consider that for tax benefit instead of current flat.

answered Feb 10 '12 at 16:13 by pankaj 5.2k320

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Asked: Feb 04 '12 at 14:27

Seen: 1,058 times

Last updated: Feb 10 '12 at 16:13