Income tax on long term capital gain

Tax queries 448 views 5 replies

Vinayak Bhat

6 Points Joined November 2015

My father in-law has sold his old house for 67 lacs and paid 2 lacs to real estate agent in the month of October 2015. He had purchased this house in 1978 for Rs. 12,000. His second daughter bought one flat in Bangalore for 58 lacs in February 2015. She has made her father as third applicant in purchasing the house. Property is going to be completed in 2018. My father in-law is going to pay complete amount for this property. How to address the income tax and what is the best option to save maximum capital gain.

Replies (5)

Ruchi

1410 Points Joined March 2015

Is the father a co-owner of the new property also?

Vinayak Bhat

6 Points Joined November 2015

Yes, He is the co-owner of the property

S. Shiroor

Others

1212 Points Joined July 2015

1) First step is to ascertain the Market value of 1978 flat as on 1 st April 1981

2) Infaltion Index for 1981 =100 and 2015-16 =1081 . Find the Indexed cost of the old property in 2015-16. deduct the brokerage from SP of the old flat and find out the Capital gains.

3) Since ur FIL is funding property that means he is investing the capital gains

Let us say the market value of old flat is 20000 in 1981 = Indexed cost in 2015-16 is 216200

Cost of Improvement [painting and other civil work] let us say 25000 in 1995

indexed cost of improvement is 88606

Total selliing price is 67 - 2 brok = 65 laks

Net cap gains is around 62 lakhs . new House purchased 58 lakhs. can add registration also. Remaining amt you can invest in LTCG bonds.

So Purchase bonds of NHAI or REC worth 4 lakhs for NIl tax

I hope i am corrrect on this - though experts can improve onthis.

Vinayak Bhat

6 Points Joined November 2015

Thanks for the reply. How to ascertain market value of the asset as on 1981. Also how to establish money spent for improvement. Is there any way like highering valuer and getting report which is acceptable to IT department.

Guest

just take it as 12000

any cap asset bought before 1981 cannot be indexed.

for Cost of acquisition :- 12000 * 1081/100 =129720

for FV of consideration :- 6700000-200000 = 6500000

your LTCG will be - 6500000 - 129720 = 6370280

( if there is cost of improvement, index that and add to ur COA)

after u got ur LTCG, u can awail the exemption of section 54 (as ur father invested in residential property, assuming he has 1 residential property on the date)

so u can take the deduction of the amount of investment made in the new house for calculating LTCG