Hi.. my mother bought a land in 1992 for 1lac and took a loan of 3 lac in constructing a house there, later in 2004 i settled the existing loan and took a fresh housing loan of 13 lac to modify and expand the same. today we intend to sell the property for 1.5cr and buy a flat for 60Lac and another for 50lac, can you please help me with the LTCG tax calcuation for this situation.
1 Answers
Cost inflation index (CII) for year 2011-12 has not been notified yet, so below calculations have been done with CII of 2010-11. Once CII is declared, you may do the actual calculations again.
Purchase Year = 1992-93
Purchase and initial construction Cost = 400000
Cost Inflation Index (CII) for purchase year = 223
Further Construction Year = 2004-05
Further Construction Cost = 1300000
Cost Inflation Index (CII) for Further Construction year = 480
Sale Year = 2010-11
Selling price = 15000000
CII for sale year = 711
Indexed Purchase/Construction Cost = 400000 x (711/223) + 1300000 x (711/480) = 3200961
Long term capital gain = 15000000 - 3200961 = 11799039
Income tax on capital gain = 11799039 x 20% = 2359807.8
As long term capital gain is around 1.18 crore. In order to save income tax on this amount, whole of this amount will have to be invested into a single property.
if you buy two properties, only the higher priced one will be considered (60 lacs) and you will have to pay income tax on remaining amount (58 lacs) @ 20%.
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