Sukamal Bhattacharya 27 June 2018

Long Term Capital Gain Tax

I bought a Land in Jul 1995 at a price of ₹48,000. and sold it in Jun 2018 at ₹67.5 Lac. How much will be LTCG on this deal.
Further, this property was jointly bought and sold by myself and my wife. If we want to avoid paying any I.Tax, how much Tax Saving Bond will have to purchase by us?

S.Bhattacharya

Reply Follow

3 Replies

Advocate Kappil Cchandna (Expert Bail & Criminal Defence Lawyer at Delhi Supreme Court of India) 27 June 2018

Sir,

Talk to CA Karan Chandna at 9871563826....

Warm Regards

Kapil Chandna Advocate

9899011450,9911218741

R.Ramachandran (Advocate) 27 June 2018

Dear Mr. Sukamal,

Recently, the Govt. has changed the base year of indexation from 1981 to 2001.

Therefore, FIRST you have to ascertain the Fair Market Value of the plot of land as on 1.4.2001, by approaching a Government Valuer of properties in your area. [THAT WOULD BE ADVANTAGEOUS TO YOU AND WILL HELP IN REDUCING THE AMOUNT OF CAPITAL GAINS].

However, in order to help you to roughly know about the amount of Long Term Capital gains based on the 1995 purchase value, the calculation is given below.

In the year 1995-96 the cost index was 281.

In the year 2018-19 when you sold the property, the cost index was 680.

Therefore, the indexed cost of acquisition of the property in the year 2018-19 = original cost x 680 divided by 281 i.e. 48000x680 divided by 281 = 116157.00

The Long Term Capital Gain = Sale Proceeds MINUS Brokerage paid if any (provided there is proof) MINUS Expenditure like Advt., etc. incurred if any MINUS Indexed cost of acquisition.

In the instant case it will be Rs. 67,50,000 MINUS Rs. 1,16,157 = Rs. 66,33,843/-

Long Term Capital Gains Tax @ 20% is payable on Rs. 66,33,843/- which comes to Rs. 13,26,769/- SAY Rs.13,26,770/-

The payment of this Long Term Capital Gains Tax can be avoided, provided you adopt any of the following methods:

1. Purchase a New Property (both in the name of you and your wife) whose purchase value should not be LESS than Rs.66,33,843/- within 2 years from the date of sale of the property OR

2. Construct a new property (both in the name of you and your wife) whose constructed value should not be LESS than Rs.66,33,843/- within 3 years from the date of sale of the property OR

3. DEPOSIT WITHIN 6 MONTHS FROM THE DATE OF THE SALE, the entire Rs.66,33,843/- IN NATIONAL HIGHWAY AUTHORITY OF INDIA or RURAL ELECTRICITATION AUTHORITY OF INDIA BOND for 5 years. (The deposit in the Bond will get you interest @ 5.25% which is taxable),

Other than the above options 1, 2 and 3 there are no other options to avoid the payment of Long Term Capital Gains Tax.

2 Like