What is the tax to be paid?

djl 1
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I have a house which i took pocession in Apr 2002 for 9 lakhs. The cost of the house is now 40 lakhs . If I sell the house now what is the tax that I have to pay ? and secondly how to avoid it ? Thanks

section-54ec long-term-gains section-54 capital-gains income-tax
1 Answers

As the house has been kept for more than three years, long term capital gains will arise on sale.

Below is an computation for LTCG and income tax:

Purchase Year = 2002-03
Purchase Cost = 900000
Cost Inflation Index (CII) for purchase year = 447

Sale Year = 2011-12
Selling price = 4000000
CII for sale year = 785

Indexed Purchase price = 900000 x (785/447) = 1580537
Long term capital gain = 4000000 - 1580537 = 2419463
Income tax on capital gain = 2419463 x 20% = 483892.6

This income tax can be saved fully in two ways:

  1. Section 54: You can buy another residential property within two years of sale, with cost more than capital gains (S, computed above). This exemption won't be available on buying land. If land is purchased, a house needs to be constructed on same within three years of sale. If new house is not purchased before income tax return filing of same year, this gain amount has to be put into capital gain account scheme only before payment for new house.
  2. Section 54EC: Whole capital gain amount (S) can be invested into capital gain bonds (issued by NHAI and REC). Max limit of investment in these bonds are 50 lacs per financial year.
Pankaj Batra5212
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