Loan against property on which I want Capital Gains Tax exemption.

I had bought a flat in Pune in 2005 for 13 lakhs jointly with my wife. I sold the flat in November 2010 for 40 lakhs. In order to avail Capital Gains tax exemption,I had reinvested the money and I had bought another Flat for 50 lakhs., on 30th. Dec. 2010, in my name, my wife,s name and my son,s name(3 names). I had put in the extra 10 lakhs from my savings. My son had not contributed any money for this purchase. Now my son needs money for a new business venture. Now my son has got a housing Loan sanctioned in all 3 names, and We his parents are co appplicants, for a loan of 40 lakhs for the flat already purchased on 30th. Dec.2010. This 40 lakhs which We will get, will be used for my son's business purpose. My question is, can I avail of Capital Gains Exemption?
If not, then suppose he takes a business loan, (instead of Housing loan) against this new property. Will we be entitled to claim Capital Gains tax exemption? SUBHASH AGARWAL

asked Apr 28 '11 at 03:08 by agestates 1111


Yes, you can claim capital gain exemption as a new house is bought within allowed time period.

Below is the computation for capital gains:

Purchase Year = 2005-06
Purchase Cost = 1300000
Cost Inflation Index (CII) for purchase year = 497

Sale Year = 2010-11
Selling price = 4000000
CII for sale year = 711

Indexed Purchase price = 1300000 x (711/497) = 1859759
Long term capital gain = 4000000 - 1859759 = 2140241
Income tax on capital gain = 2140241 x 20% = 428048.2

Long term capital gains will be divided in same ratio between you and your wife, as the property ownership ratio was. Rs 1070120 in case of 50-50 share.

Now each of you will have to invest in new property with value of share equal or more than 10.70 lakhs. Your new flat is of value 50 lakhs. If three persons have equal share in it. then each share cost is around 17 lakhs, which is more than required amount to invest for saving income tax on capital gains.

answered May 01 '11 at 06:45 by pankaj 5.2k320

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Asked: Apr 28 '11 at 03:08

Seen: 1,864 times

Last updated: May 01 '11 at 06:45