Capital Gain Tax for selling of a flat

Dear Mr. Batra,

I am a new comer in your site and would like you to guide me for my case.

I purchased a flat in 2003 for Rs.4,00,000/- I am going to sell out this flat within June/July of this year for Rs.15,00,000/-.

Meanwhile, I booked a flat for Rs.18,25,000/- in May, 2009. This flat also will be handed over to me within June/July this year. For buying this new flat, I borrowed 6.00 lacs from Bank and 11.00 lacs from relatives (through cheque).

Besides this, I do not have any property in my name.

Now, I would like to know :

(1) What will be my capital Gain tax out of this selling amount of Rs.15,00,000/- ?

(2) Can I utilize a portion of this selling amount of Rs.15,00,000/- for refunding the loan of Rs.11 Lacs to my relatives ?

(3) In that case, what will be my Capital Gain Tax ?

(4) And what Implication I will face for the residual amount (15.00 - 11.00) i.e. 4.00 Lacs ?

asked Jun 10 '11 at 07:20 by Rahat 1222

  1. Capital gains will be around 8 lacs.
  2. Yes, you can pay back your loan taken from relatives from the sale income.
  3. In order to save income tax on long term capital gains, a new residential property can be purchased one year before sale or two years after sale. As you already bought a new flat, that can be considered for tax exemption. But registration and possession of new flat must be between time frame of one year before and two year after sale of old flat. If this case is not valid, 20% income tax will have to be paid on capital gain amount.
  4. Rest of the amount, you can keep it with you, there will be no tax liability on that.

answered Jun 10 '11 at 14:16 by Pankaj Batra 5.2k320

Thank you so much Sir. It will really help me a lot. But, I am just curious to learn about the calculation which declares Capital Gains of 8.0 Lacs. Because, appparently the difference between selling and buying price is (15.0 - 4.0) = 11.0 Lacs. Can you please do this favour ? Thanx & regards - Rahat
(Jun 13 '11 at 02:13) Rahat
Capital gain is computed with indexation rules. Please see calculation below. This is just an indicative one as CII for 2011-12 has not been declared yet and has been assumed as 800. Purchase Year = 2003-04 Purchase Cost = 400000 Cost Inflation Index (CII) for purchase year = 463 Sale Year = 2011-12 Selling price = 1500000 CII for sale year = 800 Indexed Purchase price = 400000 x (800/463) = 691145 Long term capital gain = 1500000 - 691145 = 808855 Income tax on capital gain = 808855 x 20% = 161771
(Jun 13 '11 at 13:24) Pankaj Batra
Thank you so much Sir for your valuable support. It will definitely help me to plan my case. Thank you once again. With sincere regards - Rajib
(Jun 14 '11 at 01:33) Rahat

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Asked: Jun 10 '11 at 07:20

Seen: 2,638 times

Last updated: Jun 14 '11 at 01:33