Is we are selling a property and we have a net profit (or capital gains) from the sale, then should reinvesting in purchase of another property be of the sold property sale value or equalling the capital gains amount.
For eg. If I purchased a property in 2009 April for 50 lakh, and sold in 2013 May for 90 Lakh, then the capital gains would be 90 lakh - (indexed value of 50 lakh).
The indexed value = 50lk * 939/632 = 74.3Lakh
So the capital gains is 15.7 lakh.
Should a person reinvest 90 lakh or 16 lakh to avoid being taxed?
I am of the understanding that i need to only consider the capital gains i.e. 16 lakh to be reused in investment and not entire 90 lakh. Please confirm the same or else clarify.
Thanks
Arun
CAclubindia
