Do I have to pay capital gains tax on the sale of my inherited property in Bhayandar?

Ans: 01. As described in your question, you might have received Rs.16.00 lakhs (1/6 shares of Rs.96.00 lakhs), in your account.
02. Keeping in view the cost details which have mentioned, LTCG would just be negligible (may be less than Rs.1.00 lakh in your case). You may pay tax on the same & go ahead, instead of involving in any sort of litigations.
Most welcome for any further clarifications. Thanks.

Ans: let’s work through the details of your capital gain calculation step by step and discuss the tax implications. Here’s a detailed answer to your query:

Calculating Capital Gains on Sale of Property
Understanding Key Terms
Cost of Acquisition: The original price paid for the property, which is Rs. 2 lakh in 1994.
Indexed Cost of Acquisition: The cost of acquisition adjusted for inflation using the Cost Inflation Index (CII).
Sale Price: The price at which the property was sold, which is Rs. 30 lakh in 2024.
Cost Inflation Index (CII)
The Cost Inflation Index (CII) is used to adjust the purchase price of the property for inflation. Here are the relevant CII values:

1994-95: 259
2008-09: 582 (year of registration under amnesty scheme)
2014-15: 1024 (year of your father's death)
2023-24: 348 (assumed latest CII for calculation purposes)
Step-by-Step Calculation
Determine the Year of Acquisition for Indexation Purposes:

Since the property was registered under the amnesty scheme in 2008, we use 2008 as the base year for indexation purposes.
Calculate Indexed Cost of Acquisition:

The original cost of acquisition (in 1994) is Rs. 2 lakh.
The CII for 2008-09 is 582, and for 2023-24, it is 348.
Indexed Cost of Acquisition = (Cost of Acquisition) * (CII of the year of sale / CII of the year of acquisition).
Indexed Cost of Acquisition = Rs. 2,00,000 * (582 / 348).
Calculate Capital Gain:

Sale Price: Rs. 30 lakh.
Capital Gain = Sale Price - Indexed Cost of Acquisition.
Calculations
Indexed Cost of Acquisition
Indexed Cost of Acquisition = Rs. 2,00,000 * (582 / 348) = Rs. 2,00,000 * 1.6724 = Rs. 3,34,480

Capital Gain
Capital Gain = Sale Price - Indexed Cost of Acquisition

Capital Gain = Rs. 30,00,000 - Rs. 3,34,480 = Rs. 26,65,520


Tax Implications
Capital gains tax on the sale of a residential property is typically categorized as long-term capital gains (LTCG) since the property was held for more than three years. The LTCG tax rate is usually 20% with indexation benefits. Here's a more detailed breakdown:

Long-Term Capital Gains Tax (LTCG):

The LTCG on the sale of a residential property held for more than three years is taxed at 20% after indexation.
Calculation of LTCG Tax:

LTCG = Rs. 26,65,520
LTCG Tax = 20% of Rs. 26,65,520 = Rs. 5,33,104
Reducing Tax Liability
To reduce your tax liability, you can consider the following options:

Investing in Capital Gains Bonds:

You can invest up to Rs. 50 lakh in specified bonds under Section 54EC to save on LTCG tax. These bonds have a lock-in period of five years and provide a safe investment option with tax benefits.
Investing in Residential Property:

Under Section 54, you can reinvest the capital gains in purchasing or constructing another residential property. This needs to be done within two years of the sale of the property or within three years if constructing a new house. This exemption is available if the new property is not sold within three years from the date of purchase or construction.
Setting Off Losses:

If you have any other capital losses, you can set them off against these gains to reduce your taxable amount.
Steps to Follow
Calculate Your Exact Tax Liability:

Use the above formulas to compute the exact LTCG and the corresponding tax.
Plan for Tax-Saving Investments:

Decide whether to invest in capital gains bonds or a new residential property to save on LTCG tax.
Consult a Certified Financial Planner (CFP):

A CFP can provide personalized advice tailored to your financial goals. They can help in selecting the right tax-saving investments and strategies to optimize your tax liability.
Final Insights
To summarize, you have made a significant capital gain of Rs. 26,65,520 from the sale of your property. This gain will be subject to long-term capital gains tax, typically at a rate of 20% after indexation. However, by strategically planning your investments, you can reduce your tax liability significantly. Consider investing in Section 54EC bonds or another residential property to avail of tax exemptions. Regularly consult with a Certified Financial Planner to ensure your financial decisions align with your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: 01. In absence of exact figures, it is not possible to calculate your Capital Gains Tax. However, following details may help you to assess your tax liability.
02. Under present provisions of Income Tax Act, you may opt any of the options (Long Term
Capital Gains), as under :
(a). Tax Rate 12.50% without indexation or
(b). Tax Rate of 20% with Indexation.
03. You may calculate your tax liability under both options & may opt for the tax regime, where tax liability is minimum.
04. Most welcome for any further clarifications. Thanks.

Ans: Dear Sir,

Based on the information shared,
the Long Term Capital Gain shall be around Rs.21,54,000 and Tax liability shall be Rs.431000 (With Indexation)
the Capital Gain shall be Rs.9350000 and Tax liability shall be Rs.1168750 (WithOUT Indexation)

It is strongly advisable to consult CA to understand tax liabilities
Vipul Bhavsar
Chartered Accountant
www.capitalca.in