My father wants to sell one of his houses. He has two houses in his name. He bought this one for INR 40,000 in 1986 and now it is worth 2.25 crore. What would be the capital gains tax he would have to pay and is there any way to reduce it?
Answered on November 08, 2017
To compute the amount of capital gain, you can refer to the provision of section 48 of the Income Tax Act. Based on the facts provided, as the property has been sold after a period of 24 months, the capital gains would be long term capital gains. Such capital gains would be computed as below:
Difference between Sale consideration (Rs. 2.25 crore) and the indexed purchase consideration (Rs. 40,000 suitably adjusted by cost inflation index of year of sale to year of purchase)
To reduce the capital gain tax liability, you can make investments in another residential flat as per the provision of section 54 of the Income Tax Act.
Alternatively you can also invest the amount in long term specified asset given out u/s 54EC and 54EE of the Income Tax Act. Under this the maximum investment you can make in long term specified assets will Rs. 50,00,000/- and accordingly Capital gain will be exempt upto RS. 50,00,000/-
To reduce the capital gain tax liability, you can make investments in another residential flat as per the provision of section 54 of the Income Tax Act.
Alternatively you can also invest the amount in long term specified asset given out u/s 54EC and 54EE of the Income Tax Act. Under this the maximum investment you can make in long term specified assets will Rs. 50,00,000/- and accordingly Capital gain will be exempt upto RS. 50,00,000/-
