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This discussion clarifies capital gains tax calculation for a property sold in 2020 for Rs. 1.5 Crores, bought in 1985 for Rs. 1 Lakh. The estimated long-term capital gain is Rs. 1.47 Crores. It also explores exemptions under Section 54, confirming that investing the gains in two properties or constructing two houses within specific time limits can exempt the tax. Clarification is also sought on whether the exemption applies to the agreement value or sale deed of the land.

SREE MADHAVI Boppana

SREE MADHAVI Boppana (Querist)

09 April 2021 Dear Sir, My mother in law's property (Residential land of 286 Sq Yds) which was bought in1985 for Rs.1 Lakh sold in 2019 for Rs.1.50 Crores. How much is the capital gain tax. Can we save the capital gain tax if we buy land and construct a house (within three years)? do we have to deposit the capital gain tax till we construct a house. kindly clarify. regards. madhavi

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

10 April 2021 LTCG = sale consideration - indexed cost of acquisition
sale consideration = 1.5 cr
indexed cost of acquisition = 2.89 lac [1 lac x 289/100]
LTCG = 1.47cr (1.5 cr - 2.89 lac]
Tax @20% on above

*Year of sale is assumed as FY19-20

You have an option to choose between cost of purchase or fair market value as on 01/04/2001 in order to compute indexed cost of acquisition.

In order to avail benefits of section 54, capital gain should have been invested in CG deposit account before filing return of income for FY19-20. If this has not been done, I don't think exemption u/s 54 can be availed.

SREE MADHAVI Boppana

SREE MADHAVI Boppana (Querist)

10 April 2021 Dear Madam, thanks for the reply. Year of sale is 20-21 (November 2020). If we buy two houses u/s 54 in her name, do we get exemption for both. or can we buy land & construct a house is exempted.

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

10 April 2021 Yes, you may avail exemption if you buy 2 houses within 2 years or construct 2 houses within 3 years from date of sale.

SREE MADHAVI Boppana

SREE MADHAVI Boppana (Querist)

01 July 2021 dear madam,
exemption is considered on agreement value / sale deed of land value. please clarify.

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