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Capital gain tax

13 September 2015

I have sold in August 2015, commercial shop which I bought in April2004 .. I have claimed depreciation on the same and wdv on 1.4.15 is Rs.1,73,000/- I had bought said shop for Rs.18 Lakhs and sold for Rs.46 Lakhs. How much will be my Capital gain tax , will it be treated as long term capital gain , and how can I save capital gain ? Can I invest in 54EC bonds of REC .? Can I claim long term capital gain under sec 54F and yet save tax by buying govt.bonds of REC ? I am willing to invest entire sale proceeds.

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7 Replies

S. Shiroor (Others) (1207 Points)
Replied 13 September 2015

Cost inflation Index for 2004-05 is 480

Cost inflation Index for 2015-16 is 1081

Inflated index cost of property is 18 x 1081/480 = 40.53 lks

Add improvement cost and calculate inflated index cost of improvement [repairs etc]

Deduct brokerage if applicable from 46.

Net gain is 5 to 6 lks.

i am not sure if commercial shop comes under 54EC/54F/54.

other experts also throw some Light.

CA Rajat Bajaj (Job) (1042 Points)
Replied 13 September 2015

It will be a short term capital gain, because it is depreciable asset, capital gain would be 46lakh-1.73lakh. And although it will be Short term capital gain, yet you CAN INVEST in section 54EC, and 54F property, and exemption will be allowed, because for purpose of section 54EC, OR 54F, Asset holding should be long term (as per ICAI view given in study materials). If you want to invest in 54F, then you have to invest full 46lakhs for full amount of exemption, and if you invest in 54EC, you have to invest the amount of Capital gain only and the whole sale proceeds. better go for 54EC, but keep in mind time limit which will be 6 months from end of financial year i.e. 30 sept 2016 for 54EC

Sharad nalawade (B.Com) (26 Points)
Replied 13 September 2015

Thanks dear mr.Raj at Bajaj. R u sure abt your view of 54EC or 54F ? Is there any supportive case on the subject ? I am afraid that this cap gain w b treated as short term under sec 50 and 54EC OR 54F w not be applicable. ( dept of IT may take this view and reject exemption) Pl give supportive material and oblige so I can save burden of tax. Pl reply.rgds..sharad