Capital gain on sale of property

Based on the transaction details provided, you are selling two residential flats derived from a Joint Development Agreement (JDA) of inherited land. Under the Finance Act 2024 grandfathering provisions, you have the option to choose between two tax regimes.

Recommendation: You should opt for the Old Tax Regime (20% with Indexation). This strategy reduces your taxable capital gains to a level where your ₹98 Lakh reinvestment provides a 100% tax exemption, resulting in Zero Tax liability.

2. Capital Gains Tax Calculation (FY 2025-26)

The sale occurred in September 2025 (FY 2025-26). We use the notified Cost Inflation Index (CII) for FY 2025-26, which is 376.

Cost of Acquisition (COA) Basis:

• Total Land Area: 2,574 sq. ft.

• UDS per Flat: 257.4 sq. ft. (Total Land / 10 Flats)

• Total UDS Sold (2 Flats): 514.8 sq. ft.

• Base Cost (2001): 514.8 sq. ft. × ₹1,200 = ₹6,17,760

Regime Comparison Table

Component

Old Regime (20% + Indexation)

New Regime (12.5% No Indexation)

Total Sale Consideration

₹1,10,00,000

₹1,10,00,000

Cost of Acquisition

₹23,22,778 (Indexed*)

₹6,17,760 (Actual)

Gross Long-Term Capital Gain

₹86,77,222

₹1,03,82,240

Section 54 Exemption

(₹86,77,222)

(₹98,00,000)

Net Taxable Capital Gain

NIL

₹5,82,240

Estimated Tax Payable

₹0

₹72,780 (+ 4% Cess)

*Indexed Cost = ₹6,17,760 × (376 / 100)

3. Methodology: UDS vs. Built-up Area

Legally Compliant Method: You must use the Undivided Share of Land (UDS).

• Reasoning: The Guidance Value of ₹1,200/sq. ft. in 2001 refers to the value of undeveloped land. Since the flats did not exist in 2001, applying a land rate to the built-up area is technically incorrect and likely to be rejected by the Assessing Officer.

• Efficiency: Using the UDS ensures that you are only accounting for the cost of the specific portion of land you exchanged for the built-up flats.

4. Exemption Status (Section 54)

• Old Regime Eligibility: You qualify for a 100% exemption. Since your indexed capital gain (₹86.77 Lakh) is lower than your investment (₹98 Lakh), the entire gain is offset.

• New Regime Eligibility: You qualify for a partial exemption. Because your gain (₹1.03 Cr) exceeds the investment, you would be liable for tax on the surplus (₹5.82 Lakh).

• Note: You can include Stamp Duty, Registration fees, and brokerage paid for the new property in the ₹98 Lakh figure to further increase your exemption shield.

5. Compliance & Timelines (CGAS)

Since the sale happened in September 2025, your deadline to secure the exemption is critical:

• ITR Filing Due Date: July 31, 2026 (assuming you are an individual taxpayer).

• CGAS Deadline: If the ₹98 Lakh has not been fully paid/utilized for the new property purchase before you file your return, the balance amount must be deposited in a Capital Gains Account Scheme (CGAS) in a nationalized bank on or before July 31, 2026.

• Utilization: You have until September 2027 (2 years from sale) to complete the purchase or September 2028 (3 years from sale) if the new property is under construction.

6. Vital "Pro" Note: Section 45(5A)

As this was a JDA property, please confirm if the Completion Certificate (CC) for the project was issued before the sale.

1. If the CC was issued, you technically "acquired" these flats on the CC date.

2. The Stamp Duty Value of the flats on the CC date would then become your "Cost of Acquisition" for the sale.

3. If this value is higher than the indexed 2001 cost, your tax liability will be even lower.

This advisory note assumes you are treating the 2001 value as the primary cost basis to simplify the transition from inherited land to flat sales.