Capital gains tax

Yes It Will Be Long Term Capital Gain

computing the capital gains, the estimated market value of the new flat received in exchange would be added to the monetary amount received by the member to determine the consideration received by the member for giving up his existing flat. From this consideration, assuming that the capital gains is long term in nature (the flat has been held for at least three years), the member would be entitled to a deduction of the indexed cost of acquisition of his old flat. In case the flat was acquired before 1 April 1981, he would be entitled to substitute the fair market value of the flat as of that date and compute indexation from that date.

In case of long-term capital gains, the member would also be entitled to claim the benefit of exemption under section 54 of the Income-tax Act since he has acquired another residential house in exchange for his old residential house. This exemption would be equivalent to the market value of the new flat received by the member. Effectively, therefore, the member would be liable to capital gains tax only if the monetary consideration received by him is in excess of the indexed cost of acquisition of the old flat.

The member can also get the benefit of exemption for long-term gains of up to Rs 50 lakh under section 54EC by investing in capital gains bonds of National Highways Authority of India or Rural Electrification Corporation Ltd within six months. The capital gains tax would be computed at 20% of the taxable capital gains, assuming that the gains are in the nature of long term capital gains