I have booked a under construction flat in May 2022 for 2.80 crs inclusive of GST and stamp duty likely possession in December 2023, Flat is in joint name with my wife on 50:50 basis. I have availed joint Bank loan of 2.10 crores which is partially disbursed approx 1.76 crores up to now. balance will be disbursed before possession. I will be selling by old flat in January 2024 which is in my individual name, which I purchased in July 2017 for 92.50 lacs inclusive of stamp duty, approx selling price will be 1.25 crores. This flat is also on loan of 54 lakhs outstanding .What will be the capital gain against this and can this be setoff against the new flat? Difference amount 1.25 crores(sale price) less 54 lakhs (Bank Loan) balance amount of 71 lakhs I might pay against the new bank loan of 2.10 crores which will reduce the loan to 1.39 crores. Please guide how to go to save the Capital gain tax.

Ans: Dear Pramod KS,

Thank you for asking about the capital gains tax for your flat's sale. I'll try to simplify the explanation and give you an idea of the tax and how to reduce it. Keep in mind that the accuracy of the answer depends on the details you've provided.

You sold the flat for Rs 122 lakh in March 2023. You made staggered payments for it, totaling Rs 55 lakh, from 14/06/2010 to 25/06/2013. To find the capital gains, we need to adjust the purchase cost for inflation using the Cost Inflation Index (CII) for each payment year.

Since the payments were made over multiple years, we must adjust the purchase cost for each payment separately. For simplicity, let's assume you made equal payments of Rs 18,33,333 each in 2010, 2011, and 2013. The CII for 2010-11 is 167, for 2011-12 is 184, and for 2012-13 is 200. The CII for the year you sold the flat (2022-23) is 331.

We'll adjust each payment's purchase cost like this:
Adjusted Purchase Cost = (Payment * CII for the year of sale) / CII for the year of payment

For the 2010 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 167 = 36,19,278 (approximately)

For the 2011 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 184 = 32,94,804 (approximately)

For the 2013 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 200 = 30,18,000 (approximately)

Now, add up the adjusted purchase costs:
Total Adjusted Purchase Cost = 36,19,278 + 32,94,804 + 30,18,000 = 99,32,082 (approximately)

Now we can find the capital gain:
Capital Gain = Sale Price - Total Adjusted Purchase Cost
Capital Gain = 1,22,00,000 - 99,32,082 = 22,67,918 (approximately)

Since you owned the property for more than 36 months, this is a Long-Term Capital Gain (LTCG). The tax rate is 20% after considering inflation.

Capital Gain Tax Payable = 20% of Capital Gain
Capital Gain Tax Payable = 0.20 * 22,67,918 = 4,53,584 (approximately)

You and your spouse jointly own the property, so each of you will pay tax on your share of the capital gain, approximately Rs 2,26,792 each.

To reduce the capital gains tax, consider these options:

Invest the capital gain in special bonds under Section 54EC of the Income Tax Act. These have a 5-year lock-in period and must be invested within 6 months after selling the property.
If neither you nor your spouse owns more than one residential property at the time of the sale, you can use the capital gains to buy or build a new house within specific time limits under Section 54 of the Income Tax Act. You must buy the new property within 2 years or build it within 3 years from the sale date.
Remember that these options have certain rules and limits. It's a good idea to talk to a tax professional to discuss your specific situation, calculate the exact adjusted purchase costs and capital gains, and follow the correct rules. I hope this information helps.

If you need assistance with the exact calculations based on the specific payment amounts and dates, a tax professional can guide you through that process. They can also help you understand the various exemptions and investment options available to minimize your tax liability further.

I hope this information has been helpful in clarifying the capital gains tax and potential ways to reduce it.

Best regards,
Hardik Parikh

Ans: 01. You are entitled for exemption u/s 54 for the LTCG, which you would be investing in new Flat. Kindly ensure to purchase the new flat within a period of 2 years (gap between the registration of both flats) from the sale of flat. this is a condition to avail exemption.
02. You won't need to open CGAS, if you purchase the new flat by 31st July-2025. If this is not possible, then you must have invested/paid against purchase of flat more than Rs.40.00 lakhs as part payment of flat. Otherwise, you will have to open CGAS account & keep the amount of capital gain only, in that account.
Most welcome for any further clarifications. Thanks.

Ans: You have already taken a very good step by purchasing another residential flat immediately after selling the old one. This can help you save a substantial portion of capital gains tax.

» Nature of Capital Gain

Since the flat was purchased in 2015 and sold in March 2026, the gain will be treated as Long Term Capital Gain (LTCG)
LTCG on property is taxed at 20% with indexation benefit

» How Capital Gain is Calculated
Capital gain is not calculated simply as:
Sale Price – Purchase Price

You will get:

Indexed cost benefit on your original purchase cost
Deduction for eligible expenses like:
Registration charges
Brokerage
Major renovation/improvement expenses

This indexed cost significantly reduces taxable gain.

» Benefit of New Flat Purchase

You sold old property in March 2026
Bought new flat in April 2026 for Rs 76 lakh

This qualifies for exemption under Section 54.

Meaning:

Amount invested in new residential property can be reduced from capital gains

So your taxable capital gain will reduce substantially.

» Important Clarification

Tax exemption is linked to the capital gain amount, not entire sale value
If full capital gain is not invested, balance gain becomes taxable

» Additional Tax Saving Options
If any capital gain still remains taxable, you may consider:

Investing in specified Capital Gain Bonds within 6 months
This can further reduce tax liability

» Important Conditions

New property should not be sold within 3 years
Keep all purchase/sale documents safely
Maintain proof of payment and registration

» Finally

Your gain will be treated as Long Term Capital Gain
You will get indexation benefit
Purchase of new flat for Rs 76 lakh will help reduce tax significantly under Section 54
Remaining taxable gain, if any, can be managed through capital gain bonds

A proper indexed calculation by a Chartered Accountant will give exact tax liability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.linkedin.com/in/ramalingamcfp/