kiran (proprietor) 06 March 2013

Capitalgains

my friend sold thecommercial property ,,havingcapital gains of rs. 33 lakhs... what is the index price ,, and what is the beter way to say capital gains....our cost price was rs.11.lakhs

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Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 07 March 2013

To calculate this actual gain, the Income Tax department releases a cost-inflation-index (CII) figure every year. Usually, in May, it will release the CII for the last financial year - so the CII for 2010-11 will be released in May 2011.

Effectively, the cost of acquisition becomes substantially lower. The formula is:

Indexed Cost of Acquisition = (Actual cost of purchase) * (CII Of Year of Sale)/(CII of Year of Purchase).

Capital Gain = (Sale Price MINUS Indexed Cost of Acquisition).

Capital Gains Tax = 20% of Capital Gain

For example, if you bought 1000 units of a debt fund at Rs. 50 per unit in 2008-09 and sold the 1000 units in 2009-10 for Rs. 55, then:

(Purchase Price = Rs. 50,000 and Sale price = 55x1000 = Rs. 55,000)

a) Indexed Cost of Acquisition = 50,000 x (632/582) = 54,295.

b) Capital gain = 55,000-54,295 = 705.

c) Capital Gains tax = 20% of 705 = Rs. 141.