Hello,
1 property was bought in 1995 and since then every year a certian amount was paid till 2008 towards installment. the actual cost was about 35 lacs and sold in 2010 at 90 lacs. Now, as per indexation calculation there is a long term capital loss, my question is how do i post the entry and show indexation loss? when actually there is a straight profit of 55 lacs.
1. Indexation Loss is for the purpose of Income Tax only. It need not be reflected in books of accounts. In books you can show gain on sale of Flat.
2. Otherwise, you can credit Capital Account by the amount of Indexation as "Indexation of Capital Assets", and debit the Capital Loss Account.
Eg. if your indexation Loss is 10 Lacs. Debit 10 lacs to capital account , and credit capital account by 75 Lacs as Indexation of Capital Assets.
Triveni Turbine Limited
Bengaluru
CA
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