LTCG on Property sale

V Anand123 1
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Hi Pankaj, my mom is a government employee has a residential home (currently living) and a residential plot(purchased in 1987 at Rs 4000 only). She is planning to sell the plot worth 11 lac in this month Aug 2011 and planning to invest the amount either in a residential plot or independent house worth 20 lac. As per my calculation using the index, about 10.77 lacs would be considered for LTCG tax. But as per the government rate the plot price is minimum of 3.50 lacs now a days.

Please answer the following queries:

Can you please tell me the LTCG would be applicable as per CII index or the amount left after substracting the government rate?

Is there any tax applicable immediately if she keeps the money in the normal saving bank account in SBI or she should immediately open a Capital gain account scheme account?

If she would not purchase new property till FY 2011-2012, then should she mention the capital gain profit from plot in return filing or no need to mention after putting money in Capital gain account scheme account?

If she along with me and my brother purchase a plot or bluilt up house worth 20 lacs, will she along with me and my brother eligible for home loan and also get exempt from LTCG tax?

Thanks in advance.

section-54f cost-inflation-index long-term-gains capital-gains ltcg income-tax
1 Answers

Computation for long term capital gains:

Purchase Year = 1987-88
Purchase Cost = 4000
Cost Inflation Index (CII) for purchase year = 150

Sale Year = 2011-12
Selling price = 1100000
CII for sale year = 785

Indexed Purchase price = 4000 x (785/150) = 20933
Long term capital gain = 1100000 - 20933 = 1079067
Income tax on capital gain = 1079067 x 20% = 215813.4

As she is selling a plot, section 54F can be applied to save income tax on LTCG.
She would have to buy another residential property (built-up house/flat/apartment) with cost more than sale consideration of plot (11 lacs) within two years from sale, to save tax fully. If a plot is bought, house should be constructed on it within three years from plot sale.

She can keep sale consideration amount in normal bank account before tax return filing of plot selling financial year. If same is not invested into residential property, by then, whole amount would have to be deposited to Capital gain scheme account.

There won't be any need to mention after putting money in Capital gain account scheme account.

If she purchase a residential property in joint ownership, cost of her share in new property should be more than sale consideration of sold plot, to save tax fully.

Also, please follow below conditions for section 54F:

  1. Possession of new property must be taken within two years from sale of old property. Or new house can be constructed within three years of sale.
  2. Your wife should not be owning more than one residential house(flat/house/apartment) at the time of buying new property.
  3. If total residential houses owned by your wife is two (including new property), she should not buy another one within next three years of purchase. Or in next three years, total owned residential houses should not be more than two.
  4. New property should not be sold before next three years.
Pankaj Batra5212

Thanks sir for clearing the fact. One more question: Can she invest the same in commercial shops and claim for LTCG tax benefit or it must be only 1 property for the purpose of residential house.

V Anand123•

No benefit is available for investment in commercial properties. Also benefit can be taken only against a single residential house property.

Pankaj Batra•
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