LTCG ON SALE OF RESIDENTIAL PROPERTY

shivani071177 1
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Hi pankaj and thanks for your earlier reply- it was a relief. Need your help to calculate this:

A bought a residentialplot in 1976 for Rs 15000-. He spent Rs 80,000- on construction in 1978, Rs 100,000- in 1983 and took a loan for Rs 500,000- in 2004 for renovation , he is still paying interest on that. He sold the property for 70 lacs in 2011.

  1. How to calculate LTCG by applying indexation. He is retired now and earns pension of 9000 p.m.
  2. Is the interest paid on Home Loan also taken in account.
  3. If he decides to gift the house to his son, what is the tax on gift payable by him and how much tax does the son pay. MANY THANKS
residential-property long-term-gains capital-gains ltcg home-loan income-tax
1 Answers

Cost inflation index used in calculations of indexed cost was started from the year 1981-82.

So you will have to assume a fair market value in 1981 to compute capital gains. Fair market value can be assumed on basis of on-going prices in same/similar area in same city during 1981-82.

Lets say, Cost in 1981-82, comes out to be = 1.2 lakhs

Purchase Year = 1981-82, Purchase Cost = 120000, Cost Inflation Index (CII) for purchase year = 100
Renovation Year = 1983-84, Renovation Cost = 100000, CII for Renovation year = 116
Renovation Year = 2004-05, Renovation Cost = 500000, CII for Renovation year = 480
Sale Year = 2010-11, Selling price = 7000000, CII for sale year = 711
Indexed Purchase price = 120000 x (711/100) + 100000 x (711/116) + 500000 x (711/480) = 2206756
Long term capital gain = 7000000 - 2206756 = 4793244
Income tax on capital gain = 4793244 x 20% = 958648.80

Interest paid on home loan does not account into cost.

There is no tax on gift received in case there is a blood relation.

Pankaj Batra5212
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