Sir, I purchased one house in 2006 in 10 lac. In April'2010, I booked a flat under construction costing 37 lac and took a home loan of 25 lac in Sept'2010. The flat is likely to be handed over to me by Dec'2013. Now I want to sell the house purchased in 2006 and clear my present loan from the sale proceedings. Kindly advise(i) will this transaction help me in saving LTCG Tax.(ii) suggest right method of the transaction.
1 Answers
First you would need to compute long term gains on house sale with following method, whenever you sell it:
Purchase Year = 2006-07, Purchase Cost = 1000000, Cost Inflation Index (CII) for purchase year = 519
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = 1000000 x (Y/519) = R
Long term capital gain = Q - R = S
As you already have purchased another flat, you would be able to claim tax benefit u/s 54. To save tax fully, new flat cost should be more than gains earned from old house sale (figure S in above calculation). As per section 54 conditions, you must get possession for new flat before end of two years from date of sale of old house.
Also in case you cannot receive possession for new flat before last date of income tax return filing for financial year in which old house is sold, you would need to deposit capital gain amount into capital gain scheme account to claim benefit u/s 54.
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