Capital gains tax

Dear Pankaj,

I bought a flat in 1993 for 4 lacs.Now I am selling it for 28lacs.

Please let me know what will be the capital tax applicable.

Further,I bought another flat in 2005 by taking home loan of 25 lacs.in which 8 lacs is still outstanding.If I clear this loan utilising the amount generated from selling the above said flat,what tax benifit I will get?

With thanks,

Arvind Naik

asked Jun 18 '11 at 15:40 by veena 1111


As you are selling flat after keeping it for more than three years, long term gains will be applicable.

Below is the computation for LTCG (CII for 2011-12 has not been declared yet and assumed 800 below, once declared below calculation will have to be re-done).

Purchase Year = 1993-94
Purchase Cost = 400000
Cost Inflation Index (CII) for purchase year = 244

Sale Year = 2011-12
Selling price = 2800000
CII for sale year = 800

Indexed Purchase price = 400000 x (800/244) = 1311475
Long term capital gain = 2800000 - 1311475 = 1488525
Income tax on capital gain = 1488525 x 20% = 297705

So a LTCG is coming around 15 lacs. In order to save income tax on this, under section 54, you can purchase a new residential property (within next 2 years) or construct a house within next three years with this gain amount.

Under section 54EC, Income tax can also be saved by investing this capital gain amount into capital gain bonds issued by NHAI and REC.

There is no tax benefit on repaying home loan with this capital gain amount.

answered Jun 18 '11 at 16:45 by pankaj 5.2k320

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Asked: Jun 18 '11 at 15:40

Seen: 1,562 times

Last updated: Jun 18 '11 at 16:45