Capital gain tax

1) I am planning to sell my flat  which is registered in June 2010 and acquired i,e.possion fom builder is on august 2012 then what should be the reference for calculating  3 years from purchase for calculating capital gain ?
2) say if I get Rs 50 lacs from sale , can I pay outstanding loan on propety of Rs 20 lac and balance only consider for deposit in capital gain account?
3) or only profit after inflation index calculation to be only deposited in capital gain account?
4) Does bank interest on capital gain account deposit attracts Income tax ? can pay by withdraing from the same account?
Asked 1 year ago in Capital Gains Tax from Pune, Maharashtra
1 On registration of property in June 2010, the ownership rights were passed on to you. Hence, June 2010 should be taken as the reference month and year for calculating the cost of acquisition. If there are additional expenses after the registration, they can be considered as cost of improvement.
2 If you are claiming exemption u/s 54F, you need to invest entire sale consideration. If the existing loan is repaid, to that extent your investment u/s 54F gets reduced and you will be entitled to proportionate exemption. If you are planning to get exemption u/s 54 or 54E, you can deposit your capital gains amount. 

3 The capital gains is computed by indexing the cost of acquisition. 
4 The interest on capital gain account deposit is taxable.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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If you are claiming exemption u/s 54 or 54EC, you are required to invest only amount of capital gains.  To avail full exemption you will have to determine amount of capital gains. That's true profit after indexed cost of acquisition to be deposited in capital gain account.
Vijay N. Kale
CA, Hyderabad
248 Answers
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I think this will solve your query  -  In this connection, it would be worthwhile to refer to a very interesting decision of the Punjab and Haryana High Court in the case of Vinod Kumar Jain v CIT and Others 344 ITR 501.

In the said case the Honourable judges of the High Court laid special emphasis on the circular of the Central Board of Direct Taxes and came to the conclusion that the allotee gets title to the property on issuance of an allotment letter/registration and and that the payment of instalments is only a consequential action upon which the delivery of possession flows. The judges further specifically opined that the right of the assessee prior to the date of possession was a right in the property and, therefore, in such a situation, it cannot be held that prior to this date, the assessee was not holding the flat.  Thus, in the instant case 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. 

Shyam Sunder Modani
CA, Hyderabad
955 Answers
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since the answer was in case law i would like to answer your remaining questions one by one

2 & 3. After calculation you need to pay the capital gains tax, if you want and then you can clear your housing loan. Also you need to deposit the total capital gains tax or full sale proceeds depending upon different sections relating to Capital Gains. 

4. You can give standing instruction to your banker for credit of interest amount to your savings account and withdraw the same. The Bank credits the amount after deducting TDS or as the case may be
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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