How is short term gain / loss from property calculated

Interset for loan taken on purchase of property and paid till the date of sale shall be considered as part of teh cost of acquisition of teh capital asset and accordingly deduction shud be claimed. However teh interst paid shud be indexed year on year basis and not on overall basis.

In case of STCG teh cost of acquistion is straightaway deducted from the SAle Consideration received and STCG is to be paid.

In case of LTCG the cost of acquistion is indexed by multiplying it with the index of the year when the sale took place and dividing it with the year of index in whihc the property was being pruchased. Any cost of improvement is also indexed in the same way. From the sale consideration indexed COA and COI is deducted and teh balance is taxable as LTCG @ 20%. To save this LTCG tax one can invest either in the bonds issued by NAHI or REC u/s 54EC upto Rs 50lacs only within 6months from the date of sale, or can invest the LTCG in property by purchaseing it within 2 years from the date of trasnfer or investing it under construction property within 3 years from teh date of sale.

Hi Girdhar, Thanks for the info. However I could not understand "However teh interst paid shud be indexed year on year basis and not on overall basis". what do you mean by "indexed year on year basis"

Thanks,

Kavita

It means that suppose if you have paid interest for the year 2011-12, then interest shud be indexed by using the index for the Year 2011-12 and so on and so forth for each year. But not with the index of the year of sale.

Hope you are now clear.