Sir, during this month (August2023) I sold my flat which was purchased by me in 2010. The total sale consideration as per govt guidelines was Rs 5973000/ and was registered at that amount, accordingly TDS at 1% on it was deducted at Rs 59730 and was credited to the govt account. My query is , TDS on sale of property at 1% is applicable in case the amount of sale exceeds Rs 50.00 lakhs . Whether the TDS is applicable on full sale consideration or on the difference amount ie, (5973000-500000)Rs 973000. 2. I had purchased the flat in April 2010 and the purchase price was Rs 3150000/ including Stamp duty, Registration charges and small amount towards interior work. I request you to advise me the applicability of Capital Gain Tax on it. Now I do not want to invest in any new property or in Capital gain bonds, I want to pay the applicable tax and close the transaction. Please advise me about the applicable Tax and close the formalities applicable in this regard. Siddramappa Kudarimoti.

Ans: To calculate the capital gains tax on the sale of your house, we need to consider the acquisition cost, the cost of improvement, and the sale proceeds. Let's break down the calculations:

Acquisition Cost:
The acquisition cost is the amount you paid for the plot in 2006, which is Rs. 3 lakhs.

Cost of Improvement:
The cost of improvement includes the expenses incurred for constructing the house. In this case, it is the bank loan you took of Rs. 10 lakhs in 2007.

Indexed Cost of Acquisition and Improvement:
To adjust the acquisition cost and cost of improvement for inflation, we need to calculate the indexed cost. The indexed cost is calculated using the Cost Inflation Index (CII) provided by the Income Tax Department. The CII for the relevant years can be found on the Income Tax Department's website.

Let's assume the CII for the year 2006-2007 was 122, and for the year 2007-2023 (the year of sale), it was 317.

Indexed Cost of Acquisition = Acquisition Cost × (CII for the year of sale/CII for the year of acquisition)
Indexed Cost of Acquisition = Rs. 3 lakhs × (317/122) = Rs. 7,79,508=19

Indexed Cost of Improvement = Cost of Improvement × (CII for the year of sale/CII for the year of improvement)
Indexed Cost of Improvement = Rs. 10 lakhs × (317/122) = Rs. 25,98,360=65

Capital Gain:
To calculate the capital gain, deduct the indexed cost of acquisition and the indexed cost of improvement from the sale proceeds.
Capital Gain = Sale Proceeds - (Indexed Cost of Acquisition + Indexed Cost of Improvement)
Capital Gain = Rs. 80 lakhs - (Rs. 7,79,508=19+ Rs. 25,98,360=65)
Capital Gain = Rs. 46,22,131=16

Capital Gains Tax:
The capital gains tax depends on whether the property is held for the long term or the short term. In this case, since you held the property for more than 24 months, it qualifies as a long-term capital asset.
For long-term capital gains, you have the option to pay tax at a rate of 20% with indexation benefits or 10% without indexation benefits, whichever is lower. Indexation benefits adjust the acquisition and improvement costs for inflation.

Assuming you choose the 20% tax rate with indexation benefits, the capital gains tax would be:

Capital Gains Tax = Capital Gain × 20%
Capital Gains Tax = Rs. 46,22,131=16 × 20%
Capital Gains Tax = Rs. 9,24,426=23

Regarding the TDS (Tax Deducted at Source) of Rs. 75,000 paid by the buyer, you can claim credit for this amount while filing your income tax return. The TDS can be set off against your tax liability or claimed as a refund if it exceeds your tax liability. Make sure to provide the necessary details and documentation when filing your tax return to claim the TDS amount.

Ans: You need to understand the following things about taxation of your flat:-
1. You have earned a profit (called capital gains in this context) on the sale of your house. So tax is due.
2. However, tax will not simply be 31L – 8.5L. The Govt gives you an advantage of inflation over the years which increases your purchase cost through a process called ‘Indexation’, thus decreasing your tax. Please google and read up on it, or contact a good CA or a financial advisor.
3. You also get credit for registration and stamp duty charges, brokerages paid as also any improvements done in the house of a permanent nature.
4. Please read up on Income Tax Section 54 which also gives out how you can save tax on your final capital gains arrived at.
5. The entire calculations and sale/purchase details have to be shown in the ITR. Most probably you will be filling ITR-2 for this next year but please ascertain the same when you are about to file the tax since rules keep changing.

Ans: Yes, Stamp duty and registration fee will form part of cost of acquition. However it is not advisable to consider it as cost, if deduction u/s 80C is taken in the year of purchase.

Further, cost of improvement will allowed for deduction separately while calculating capital gain.