Advice needed on capital gain tax on sale of old gold

Gold is a Capital Assets u/s 2(14) and it is transferred for profit. such capital assets is held for more than 36 months and hence there arises Long Term Capital Gain (LTCG).

1) Full value of consideration =  RS 8,00,000

2) Indexed Cost of Acquisition =  55,000*939/100

                                             =   RS 5,16,450

3) Capital Gain (1-2) = RS 2,83,550

Note: Assumed there are no cost of improvement and cost of transfer. If there is any such type of cost,  then you may take the advantage of those  expenses.

Such Capital Gain is taxed @ 20% and Cess @ 3% is also leviable

Total Tax Calculation = (2,83,550*20%)*103%    =  RS 58,411.30

 Hope you are satisfied.

Dear Manjot

Yes, your father can claim a rebate u/s 87A (applicable from AY 2014-15 only) assuming his net income is Rs.5,00,000 or less. Here since you say your father has only Capital Gains income, which comes to only Rs.2,83,550, he can claim rebate u/s 87A.

Sanjeet's computatio will undergo a small change as follows:

In case your father is selling the gold not for some immediate spending requirements, you can consider taking exemption under Sec. 54EC or Sec.54F.

Regards

Ajay

Dear Manjot

I am very sorry, please ignore my message above. I have forgotten to apply one another beneficial provision of the Income Tax Act in your father's case.

In your father's case, if we go by the facts given by you, that is, if he has absolutely no other income other than the Long Term Capital Gains generated from the sale gold, then you can take the benefit of proviso to Sec.112 (1) (a) by which you can get a relief as per the following formula:

Relief = Exemption limit - (Net Income - Long Term Capital Gain)

= 2,50,000 - (2,83,550 - 2,83,550) = 2,50,000 

[Note: Exemption limit of Rs.2,50,000 is applicable for FY 2013-14 and it is proposed to be increased to Rs.3,00,000 for FY 2014-15]

Taxable Long Term Capital Gain (LTCG) = 283550-250000=33,550

Now if the sale is to take place in the FY 2014-15 (AY 2015-16) and assuming that the exemption limit for senior citizen is raised to Rs.3,00,000 through Finance Act, 2014, then, your father's tax payable will become NIL by following the above computation.

Reagrds

Ajay