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Neelima (Housewife)     21 January 2012

Capital gain tax from sale of property

Dear Sir

I  am selling my flat in Pune purchased in 1994 now. The flat was purchased for Rs 200,000 and now selling it for Rs 12,00,000/-I would like to know about capital gain tax if any will be applicable on this transaction? If yes how to reinvest  it so as to not to pay the Tax.

Thanks and regards





 21 Replies

Vineet (Director)     21 January 2012

Presuming you bought the flat in FY 1994-95


The indexed cost of flat is 200000 (pls add stamp duty, registration, brokerage also) X 785/ 259 = 6.06 Lakhs


Hence Long Term capital gain = 12 lakh- 6.06 Lakh = 5.94 Lakhs


You will have to pay tax@ 20.6% on the above capital gain.  You can save this tax by investing capital gain amount Rs 5.94 lakhs in new residential property or capital gains saving bonds issued by REC or NHAI.

Pls correct the computation with actual sale and purchase figures.

Neelima (Housewife)     21 January 2012

Thx for the reply.

Can u please let me know  that is it safe to accept the flat sale  amount from the buyer by the cheque ? Or anyother way to receive the payent by safer way.

Neelima (Housewife)     21 January 2012

Actually I want to ask that what is the safest way to accept the payment emans by DD,Bankers cheque,  cashiers  cheque  or just a cheque issued by the buyer 

Vineet (Director)     21 January 2012

Depends upon how confident you are with buyer.


You can accept cheque and execute document after clearing the same in your bank account. Otherwise Bankers Cheque or DD (both are same in nature) are best.

Neelima (Housewife)     23 January 2012

Thanks for your reply and kind help.

Preet (director)     23 January 2012


I understand that to offset long term capital gain , one can purchase a new property to offset the same . I have a question regarding the same . Is this exemption limited to only one house ? If have already more than one house in my name , can i buy another one to offset the capital gain .

sandeep gangwar (AUDITOR)     24 January 2012

Dear Madam


Presuming you bought the flat in FY 1994-95 , AY 1995-96

The indexed cost of flat is 200000 (pls add stamp duty, registration, brokerage IF ANY) X 785/ 259 = 606178 Lakhs

Exemption available u/s 54


Long Term Capital Gain from the Transfer of Residential House Property (Section 54)

The exemption under the Section 54 is available only an individual or a HUF who transfers (or sells) a residential house/property that results in a long-term capital gain, and then invests the amount of gain in acquiring a new residential house. This exemption is available subject to fulfillment of the following requirements: 

(i) The transferor shall be an individual or the HUF, 

(ii) The asset to be transferred must be of long-term capital asset, being buildings or lands appurtenant thereto, being a residential house,

(iii) The income from such residential house shall be assessable under the head "Income from House Property", 

(iv) The transferor assessee should purchase a residential house in India within a period of one year before or two years from the date of transfer or construct a residential house within three years from the date of the transfer of the original house. (Construction must be completed within these 3 years.), and

(v) The new house property purchased or constructed has not been transferred within a period of three years from the date of purchase or construction.

Amount of Exemption. The amount of exemption under section 54 is

Equal to the amount of the capital gain if cost of new house property is more than the capital gain, or

Equal to the cost of the new house property if the cost is less than the capital gain.

Deposit Scheme under Section 54. Where the amount of capital gain is not so utilized for the purchase or construction of a new residential house before the due date of furnishing of the return of income, it shall be deposited by him on or before the due date in an account with a public sector bank in accordance with the Capital Gain Account Scheme, 1988. The amount already utilized on the new house together with the amount deposited shall be deemed to be the amount utilized for the purchase of new house under section 54. If the amount deposited is not utilised for the purpose of purchase or construction of new house within the stipulated period, then the amount not so utilised will be treated as long term capital gain of the previous year in which the period of three years expires. In such case the assessee is entitled to withdraw the amount from the bank.

Consequences of Selling the New House Before 3-years. If the new house property is transferred within a period of three years from the date of the purchase or construction, the amount of capital gains arising therefrom, together with the amount of gains exempted earlier, will be chargeable to tax in the year of sale of the house property. To attain this, the amount of exemption under section 54 shall be reduced from the cost of acquisition to the new house, while calculating short-term capital gains on the transfer of the new asset.

Neelima (Housewife)     25 January 2012

Thanks for your reply and nice information.

In this regard further  i would like to know  that is it required to  deposit the total  amount  received from sale of flat  or the amount  towards capital gain only  in capital gain account scheme.

Also  can u please give details about investing in bondslike what happens on maturity? Whether income earned on bonds is taxfree  or again need to pay tax ? Time period for investing in bonds etc.



Preet (director)     25 January 2012

Dear Sandeep

Is this  exemption under the Section 54 limited to only one house . If have already more than one house in my name , can i buy another one to offset the capital gain .?



sandeep gangwar (AUDITOR)     25 January 2012



Dear Neelima Madam

Long Term Capital Gain Exemption for Investment in Certain Bonds (Section 54EC)

This exemption is is available an individual, HUF, company or any other person who invests the long term capital gain, within 6 months of a the transfer of the capital asset, in any of the specified bond (issued on or after April 1, 2006) redeemable after 3 years:

National Highway Authority of India (NHAI), or

Rural Electrification Corporation Ltd. (REC)

There is a limit of Rs. 50 lakh on the investments on or after April 1, 2007. 

The face value of a bond is generally Rs. 10,000 and the rate of return correctly averages about 5.5 to 5.75 per cent. This return is taxable income.

sandeep gangwar (AUDITOR)     25 January 2012


As per Section 54F of Income Tax Act 1961 Its not mention for number of house Assessee have to purchase.

Its means An Assessee can purchase more than 1 house

But there is limit For Investment U/S 54F of Rs. 50 lakh on or after April1, 2007.

B C Premkumar (Senior manager)     27 January 2012

We have bought a property for Rs.8.54 lacs(inclusive Regn.expnses) in 2003. We propose to sell the same @Rs.15.00 lacs. We have availed a bank loan of Rs.7.00 lacs and adjusted the loan in 2006. The property is used for self. We have purchased a property in 2008 by availing a bank loan and the house is letout for rent. We wish to remit the full sale proceeds or a major portion towards the liability on account of increasing interest rate.

Whether the difference amount of the sale proceeds will attract capital gains tax?(ie. 6.46 lacs)

If so whether any impovement cost can be added to the original price of  Rs.8.54 lacs for 9 years.

If I remit the full sale proceeds towards the existing home loan liability I will get exemption from capital gains tax.

If so under which clause.

sandeep gangwar (AUDITOR)     27 January 2012


Assume that financial year 2002-2003   (447) then you then your cost of indexation is  8.54L*785/447 =1499754

If financial year is 2003- 2004    (463)  ......................................................  8.54*785/463 =1447927

But as per knowledge/ experiance your proposal of selling of property is very less. stamp duty and assessing officer will be not satisfy as per ur proposal. they may be value this property more than your proposal

Calculation of Capital gain 

Sales consideration     xxx

- Transfer Exp.               (xx)

Net consideration        xxxx

Less -cost of indexation    (xx)

- cost of imporvement       (xx)

Capital gain                     xxxxx

Note: u will not get any deduction of loan/ interest on loan during calculating capital gain because u already got deduction under the head Income from house property

Neelima (Housewife)     28 January 2012

Dear Sir

Thanks for the detailed information.

So is it clear that indexed price of my flat ie Rs 6.06 lakhs ,  is available to me  with out any Tax implications  or any other burden.I can invest  it anywhere according to my choice.

As in above case will the assessing officer will be satisfied with  sale price  for my flat ?


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