I had purchased a residential plot for Rs.32,500 in the year 1995. The same plot is planned be to disposed for Rs.40 lakhs in June-2011.

1) What is the LTCG implication?

2) Can i spend the full amount for residential house construction (in this year) on a different plot, which i had purchased in 1990 and will i be exempted from LTCG tax for the above sale?

asked Jun 17 '11 at 20:58 by Nagu 1111

Long term capital gains can be computed with calculations below (please note that CII for 2011-12 has not been declared yet and it has been assumed as 800 below)

Purchase Year = 1995-96
Purchase Cost = 32500
Cost Inflation Index (CII) for purchase year = 281

Sale Year = 2011-12
Selling price = 4000000
CII for sale year = 800

Indexed Purchase price = 32500 x (800/281) = 92527
Long term capital gain = 4000000 - 92527 = 3907473
Income tax on capital gain = 3907473 x 20% = 781494.6

If you spend whole amount of consideration on sale (40 lacs) in constructing a new house within next three years, then there won't be any income tax under section 54F. But you should not own more than one residential property at the time of construction of new house.

answered Jun 17 '11 at 22:53 by Pankaj Batra 5.2k320


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Asked: Jun 17 '11 at 20:58

Seen: 2,267 times

Last updated: Jun 17 '11 at 22:54