Capital Gains Exemption

Nisha Vaidyan 1
Viewed 1418

Property bought in 1995 for 2.5 L in Bangalore, that was gifted to my wife in 2003. In 2004 we constructed the house in the property that cost us around 25 L ( Out of this 25 L, We have proof of only 15 L towards cost - Loan amount). We are selling it for 75 L.

1)Above said property is in my wifes name only..Since she is not working IT returns are not filed by her..So what is the capital gain implications..R there any exemptions ? 2)What is the capital gain ? 3)Can we invest the capital gain in another property (land) or is it mandatory to invest in House / Flat ? 4)Can this capital gain be used to buy a property jointly ?

construction-cost residential-property long-term-gains section-54 capital-gains income-tax
1 Answers

Below is an indicative computation for long term gains:

Purchase Year = 1995-96
Purchase Cost = 250000
Cost Inflation Index (CII) for purchase year = 281

Construction Year = 2004-05
Construction Cost = 2500000
Cost Inflation Index (CII) for Construction year = 480

Sale Year = 2011-12
Selling price = 7500000
CII for sale year = 785

Indexed Purchase/Construction Cost = 250000 x (785/281) + 2500000 x (785/480) = 4786941
Long term capital gain = 7500000 - 4786941 = 2713059
Income tax on capital gain = 2713059 x 20% = 542611.8

  1. Even if your wife is not working, if there is a property in her name which is being sold, income tax would be payable on gains.
  2. Your wife can buy a residential house property with cost more than 27.2 lakh within two years of sale of old property, to save income tax fully. If a plot is purchased a house should be constructed on that within three years of sale.
  3. New property can be bought in joint name as well, but cost of your wife share in new property should be more than long term gains amount to save tax fully.
Pankaj Batra5212
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