How to get rid of income tax after selling a property e,g, flat...

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Hi Pankaj, Glad to see an expert advice and in detailed too. I will like to have your advice on the below mentioned case:-

I had bought a flat in month of July 2006 for Rs 990000/= on my son’s name and my name. Same has been sold for Rs 2200000/= in month of Jun 2011. Now I am planning to buy a plot for constructing house in future but plot is presently in a non residential zone amounting more than Rs 2200000/=. Computation for Capital gain consideration for the property will be as follows:- Price of property in 2006=Rs 990000/= CII for year 2006-07 will be = 519 CII for year 2011-12 will be = 800 Price of property in 2011-2012=Rs 990000(800/519) =Rs 1526012 Capital gain =2200000-1526012=673988 Income tax=67398820/100=134798 My query is as follows: To save total tax (1) Can I purchase plot? (2) Can it be purchased in the name of my wife and daughter in law? (3) If not, then purchase of plot in same name will have any bearing if one of the person has purchased a flat without loan but did not get position as it remains still under construction. (4) If all this is not possible advice for type of property purchase which will help to make tax zero.

cii capital-gains-tax residential-property long-term-gains income-tax
1 Answers

CII for 2011-12 has been declared as 785, so making adjustments to your calculations:

Purchase Year = 2006-07
Purchase Cost = 990000
Cost Inflation Index (CII) for purchase year = 519

Sale Year = 2011-12
Selling price = 2200000
CII for sale year = 785

Indexed Purchase price = 990000 x (785/519) = 1497399
Long term capital gain = 2200000 - 1497399 = 702601
Income tax on capital gain = 702601 x 20% = 140520.2

  1. In order to save tax you can purchase plot but a house will have to be constructed on it by June 2014.
  2. New property has to be bought on name of person who got the capital gains.
  3. Long term capital gains of 7.02601 lakh will be divided between you and your son (owner of sold flat). Each one of you can buy another residential property for amount more than 3.52 lakh (assumed you had equal share in sold property) independently or buy for 7.02 lakh jointly. If you buy a flat then possession/registration must be done before June 2013.
  4. You and your son can also invest 3.52 lakh each in capital gains bonds too to save income tax.
Pankaj Batra5212
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