Civil Procedure Code (CPC)

Proceeds from sale of property

This query is : Resolved 

20 October 2010

Property bought for Rs. 30,000/- thirty years ago.

Now sold for Rs.18 Lakhs.

What would be Tax Liability and under what law?

R.Ramachandran (Expert)
20 October 2010

Dear Mr. Vijay,
The subject is covered under Income Tax Act - Long Term Capital Gains.
To ascertain the actual capital gain, the following method would be followed:
(1) First the cost of acquisition Rs. 30000 would be multiplied by index (which is based on the inflation from the time of acquisition to the time of disposal).
(2) Similarly, if there is any expenses incurred towards improvement of the property then such expenses also would be adjusted to inflation by applying the index.
(3) the net capital gain would be cost of sale price less (1) and (2) above.
On this amount 20% tax would be levied.
However, if the capital gains is reinvested in any housing property the same will get exempted from tax under Sec. 54E of the Income Tax Act.
Having thus broadly understood the matter, I would advise you to consult a chartered accountant to do the real work.

Sathyan A.R. (Expert)
20 October 2010

assumed that the property was purcahsed before FY.198-81. So the option is given as per F.Y.81.82.The cost of index for that year is 100/-. The property is sold in FY.2010-11,Th cost of index is 711 for this year.
Therefore the calculation is as under

Sale price. 3000000
Less cost price
index cost. 213300
LTCaptial gain 2786700
Tax@ fkat 20% 557240

if the LTCGis reinvested then you may get exemptin u/s.54 if it is residial property
you have not mentioned nature of property
it is presumed it is residential house property.

Devajyoti BarmanOnline (Expert)
21 October 2010


adv. rajeev ( rajoo )Online (Expert)
21 October 2010

Refer the formula given by Sathyam.

pawan sharma (Expert)
21 October 2010


soumitra basu (Expert)
22 October 2010

You are requested to take a valuation report regarding the property from an income tax registered valuer as on 01.0401981. After date based on that valuation you have to indexed the value and that shall be treated as cost of the property on date. The difference between the cost and sale price is capital gain. You can save the tax by investing the entire amount in residential property or you can invest the capital gain amount in specified bond under section 54EC. The rate of tax is 20%.

Vijay Kumar (Querist)
23 October 2010

Sir,if the sale proceed is utilised in purchasing a residential plot in the name of SON and not self, then the protection is available or not?

Devajyoti BarmanOnline (Expert)
24 October 2010

It is available.

s.subramanian (Expert)
24 October 2010

I agree.

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