Capital gain calculation

Khushal Singh Rawat (Querist) 11 December 2014 This query is : Resolved
Dear Expert,
My client sold own residential land Rs 46.00 Lacs in Nov 2014 which was purchased in Dec 2002 by Rs 3.47 Lacs. Now how can calculate Capital Gain and I want to know that in this case how is investment money in capital gain account to save tax.

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Guest (Expert) 11 December 2014
Better Post this Query in CA Club forum of LCI or Meet your Auditors for a Confirmed Reply.

Anirudh (Expert) 11 December 2014
Since the property was purchased in 2002 and sold in 2014 after holding it for 3 years, it will attract long term capital gains tax.

The long term capital gain has to be first worked out in the following manner.

Sale proceeds (minus) indexed cost of acquisition.

For arriving at the indexed cost of acquisition the forumala is

cost x index applicable for the year of sale divided by the index applicable in the year of acquisition. This is as under:

Rs. 3,47,000 x 939 divided by 447 = Rs.7,28,933.

Therefore capital gain = 46,00,000 minus 7,28,933 = 38,71,067.

20% tax on 38,71,067 = 7,74,213.

This capital gain can be saved by investing the amount 38,71,067 in purchase of a new house within two years of sale.

Or in constructing a new house within 3 years from the date of sale.

If the new house is not purchased, nor constructed before filing of the Income Tax Return for A.Y. 2015-16 i.e. by 31st July, 2015, then the amount has to be deposited in an account with any of the Nationalised Bank under the Capital Gains Account Scheme, 1988.

The amount put in the account can be withdrawn for purchasing / constructing the house. However, if the amount is not utilised either in purchasing/constructing the house within the specified period of 2 years or 3 years as the case may be, then capital gains tax has to be paid.

It is also to be noted that the above facility is available only if the person sold the house does not have more than 2 properties (including the property which he sold) at the time of sale.

In the alternative, the amount of capital gain can be deposited in Specified Assets i.e. Bonds issued by National Highway Authority of India or Rural Electrification Coporation Limited, for a specified period of time which the bond prescribes (normally for 3 years.)