Capital Gain on sale

Nisha Vaidyan 1
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a)Please help us with the capital gain calculation : Purchase price of the flat in 2007 = Rs.37,00,000 (out of 37L ,33L is on loan at 12.5% interest ; already paid around 13L as interest in last 4 yrs); additional interior work were done for 3.5 lakhs.The Selling price would be Rs.57,00,000 in Oct -2011.

b) We have sold a joint(husband & wifes name) property (flat) and planning to renovate a house using the capital gain but the house is in my wifes name only , which is gifted by her father.What are the implications ;can the CPG used in this case?

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

Home loan interest and cost of interior work cannot be added to house cost. Please find below long term capital gain computation below:

Purchase Year = 2007-08
Purchase Cost = 3700000
Cost Inflation Index (CII) for purchase year = 551

Sale Year = 2011-12
Selling price = 5700000
CII for sale year = 785

Indexed Purchase price = 3700000 x (785/551) = 5271325
Long term capital gain = 5700000 - 5271325 = 428675
Income tax on capital gain = 428675 x 20% = 85735

LTCG is only around 4.3 lakh. To save Rs 86000 income tax on this, you can buy a new residential house property from this 4.3 lakh or you can get a new house constructed from this amount. Renovation to a new house won't be considered unless there is a structural change like floor addition or reconstruction etc.

New purchased/constructed house must on the name of same person which has got capital gains. If sold property was in joint names, new property can be in joint names or two new properties can be purchased with single ownership with cost more than their gains share.

Pankaj Batra5212
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