• How to calculate Capital Gains Tax

I bought a flat for Rs 7 lakhs in 1987 (date of registration) and then sold it for Rs 27 lakhs in 2018 and bought a new flat for Rs 19 lakhs in a different town as I have retired and have settled in that town. The new flat was registered in Sept 2018. The new flat was booked in 2015 and payment was made in instalments, last instalment was made in Aug 2018. In this case how is the long term Capital Gains Tax calculated? What is the procedure for paying tax and will I have to show it in the ITR
Asked 5 months ago in Capital Gains Tax from Patna, Bihar

Dear Sir,

 

The Sale price of your flat is Rs. 27 Lakhs. The purchase price of your flat would be indexed and your Indexed Cost of Acquisition would be approx Rs. 19.60 Lakhs (Rs. 7 lakhs*280/100) and therefore your Long Term Capital Gains would be approx Rs. 7.4 lakhs. You will be liable to pay the LTCG tax @ 20.8% on Rs. 7.4 lakhs i.e. Rs. ~1.54 lakhs.

 

The amount paid by you for purchasing the residential flat can not be offset against capital gains on sale of residential flat because the new flat was not purchased 1 year before -

 

Exemption under Section 54 is allowed only if :

  • The new residential property must be purchased either 1 year before the sale or 2 years after the sale of the property/asset.

Yes, you will have to show the same in ITR.

 

Any Capital Gain Tax arised during any financial year can be disclosed in the Income Tax Return under Capital Gains Head of income in year of Assessment, and can pay either self assessment tax or adjust against TDS if any.

 

Karishma Chhajer
CA, Jodhpur
1074 Answers
4 Consultations

5.0 on 5.0

Hi

 

For calculation of capital gain, FMV of the property as on 1.4.01 needs to be known. Such value shall be indexed to be considered as indexed cost of acquisition. Considering 7 lacs only as the FMV, capital gains come to 7.4 lacs. Since FMV shall be more than 7 lacs, you'll get lower capital gains than 7.4 lacs.

Capital gains are taxable @20.8% effectively.

The exemption for reinvestment shall not be available as it does not fulfill the time limit criteria under section 54.

You need to show the capital gain calculation in your ITR as Long term capital gains from immovable property.

You are liable to pay advance taxes. It is advisable to get the capital gain calculation at the earliest and pay the taxes so as to avoid interest on late payment of advance taxes.

Lakshita Bhandari
CA, Mumbai
3056 Answers
139 Consultations

5.0 on 5.0

Hi,

 

Hope you are doing well !!

 

For the purposes of calculating capital gains on such properties, we need to know the fair market value (FMV) of a property as on 01.04.2001.

 

According to the Income-tax Act, 1961, FMV shall be the higher of:

 

  • Cost of acquisition of the property, or the price that the property shall ordinarily sell for if sold in the open market.

 

It is advisable to get the valuation of the property done from the registered valuer. Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer.

 

You will not be able to take the benefit of exemption u/s 54 as the time limit is over.

 

Once you have figured out what your capital gains or losses are, the next step is to include them in your ITR form .There are separate columns for STCG and LTCG in Schedule CG in ITR.

 

In order to avoid interest, calculate the long term capital gain amount and pay the advance taxes.

 

 

Thanks & Regards,

Payal Chhajed

 

Payal Chhajed
CA, Mumbai
2217 Answers
24 Consultations

5.0 on 5.0

Capital gain tax will be calculated by first calculating the FMV of your flat in 2001-02 and deduct it from your sales price and since you purchased flat within 1 year of sale you can claim it's exemption even if it's in another town. So this is how you can calculate capital gain tax.

Yes you need to show it in ITR.

I don't think you will be required to pay any capital gain tax. If you need any help in filing ITR you can contact.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
1486 Answers
16 Consultations

5.0 on 5.0

Hi,

- As you purchased the flat before 01.04.2001, cost of acquisition would be actual cost incurred as per sale deed or FMV on 01.04.2001 whichever is higher. Considering Rs.7 lacs as cost of acquisition, indexed cost would be 19.60 lacs resulting into long term capital gain of Rs. 7.40 lacs.

 

- You purchased new flat of 19 lacs which is more than long term capital gain of 9.60 lacs therefore no taxation.

 

- There is no need to go for valuation done to get the FMV of the property.

 

- In ITR, you need to mention the entire transaction in Schedule CG.

 

Thanks

Vivek Kumar Arora
CA, Delhi
2520 Answers
112 Consultations

5.0 on 5.0

Hi

Since the property is purchased before 2001,you have to get the FMV as on 01.04.2001 to ascertain the cost of acquisation of property.And indexation of such will be done for  Capital gain calculation.

 

To claim the exemption of caiptal gain tax,investment in new property to be done before 1 yr from sale or within 2 yrs from sale.Here You booked a flat in 2015 and sold in 2018 so time limit to claim exemption is not met so you have to pay tax on these transaction.

 

Yes show this in ITR in CG section.Pay the tax as Advance tax at earliest to avoid Interest on late on late payment.

 

Hope it helps

Swati Agrawal
CA, Mumbai
1044 Answers
4 Consultations

5.0 on 5.0

The relevant date for the purpose of claiming exemption of reinvestment in new property is the date of allotment of the new property. I assume you would have received the allotment letter in booking in 2015. Since this period is beyond the limits prescribed under section 54, exemption shall not be available.

Lakshita Bhandari
CA, Mumbai
3056 Answers
139 Consultations

5.0 on 5.0

Exemption under Section 54 is allowed only if :

  • The new residential property must be purchased either 1 year before the sale or 2 years after the sale of the property/asset.

Date of allotment should be considered as date of purchase i.e. 2015 (assuming you would have received the allotment letter in 2015) and this is beyond before 1 year of date of sale.

 

 

 

 

Karishma Chhajer
CA, Jodhpur
1074 Answers
4 Consultations

5.0 on 5.0

Hi,

- Date of registration is considered as date of ownership. Allotment is just an offer whereas registration is conclusive proof of ownership therefore sep.18 will be considered as date of ownership and benefit of exemption u/s 54 would be available. 

 

You can call me for further discussion.

Vivek Kumar Arora
CA, Delhi
2520 Answers
112 Consultations

5.0 on 5.0

You will not be able to take the benefit of exemption u/s 54 as the time limit is over.

 

As per section 54 the seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer.

Payal Chhajed
CA, Mumbai
2217 Answers
24 Consultations

5.0 on 5.0

Since the flat was registered and you got the possession of same in 2018, I guess you can claim it's exemption from capital gain.

Naman Maloo
CA, Jaipur
1486 Answers
16 Consultations

5.0 on 5.0

Hi

 If property purchase in 2007 then no need for getting FMV as on 2001,Just get cost indexed as per 2007 .

 

Based on various judgments,  it was held that the capital gain arising to the assessee would be long-term capital gain taking into consideration the date of allotment and not the delivery of the possession. 

Date of allotment is when you booked the flat and payment (or part thereof) done to seller.

You sold the flat in 2018 and booked new in 2015,exceeding time limit as per Income tax laws.

 

Hope it helps.

Swati Agrawal
CA, Mumbai
1044 Answers
4 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA