28 December 2009
hi, i had bought a property(land)in the year 1995 for Rs 41000/-. i sold the property in november of 2009 for Rs 400000/-. i wanted to know the tax on capital gains, and the method to avoid capital gain through some investments U/s 54.
28 December 2009
income from sale of land 400000 index cost 41000 *582/281 (assuming tht u purchased after 1-4-1995) (94918) --------- 305082
tax impact =305082*20%=6101= 6100
to get benefit of section 54 u have to invest 305082 to buy or construct new residential property within specified time. which is one year before and two year after of sale if u going to buy the property. and for construction u can invest within 3 years from the date of sale.
Computation will be as follow:" Net Sale Consideration = 40,00,000 (-)Indexed COA (41,000*582/281)= (84,918) LTCG = 39,15,082
"Therefore, Whole LTCG amount of Rs. 39,15,082 will be taxable but if you go for Sec 54F deduction then deduction could be accoring to that section 54F."
According to that deduction will be according to following formula:
= LTCG*AMOUNT INVESTED/NET SALE CONSIDERATION = 39,51,082*39,51,082/40,00,000 = 38,31,966
Therefore, Taxable LTCG will be = 39,51,082 - 38,31,966 = Rs.83,115
Tax on LTCG = 83,115 * 20% = 16,623
NOTE: 1) Deduction of section 54F is available only if you do not hold more than one residential house in the same year. 2) According to 54F, deduction is available only if Investment made in any residential house withing 1 year before or within 2 year in case of purchase OR withing 3 year in case of construction. 3) You have to hold for atleast 3 year that new purchased Residential House Property. 4)If you sold before completed 3 years then whole deduction amount(earlier claimed) will be taxable as LTCG in the year of sale of New Residential House. 5)Untill you investment in Purchase/Construction of New Residential House Property you have to maintain your LTCG amount in CAPITAL GAIN ACCOUNT SCHEME(CGAS).
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