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Chennai Flat Sold: Can I claim a long-term capital loss?

Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jul 29, 2024Hindi

I had purchased a flat at Chennai for 29 lakhs rupees in 2009, through a Bank loan and I have paid around 15 lakhs for the interest component additional I spent around 3 lakh rupees for the interior work (but I don't have any bills now). I sold this property on 24th July 2024 (just a day after the budget) for the same price i.e 29 lakh rupees. Could you please respond to my below queries: 1. Can I book a long term capital loss if yes how much? 2. Can I use the indexation option for this loss 3. How to book a long term capital loss and what documents are required?

Ans: You bought a flat in Chennai for Rs. 29 lakhs in 2009. You sold it for the same price in 2024. This scenario involves calculating the long-term capital loss.

Calculating Long Term Capital Loss
Original Purchase Cost:

You bought the flat for Rs. 29 lakhs in 2009.

Additional Costs:

You paid Rs. 15 lakhs in interest and Rs. 3 lakhs for interiors. However, without bills, it’s tough to claim the interior costs. Interest paid on a home loan is also not considered part of the cost for capital gains purposes.

Sale Price:

You sold the property for Rs. 29 lakhs in 2024.

Indexed Cost of Acquisition:

Indexation helps to adjust the purchase cost to account for inflation. This reduces your capital gains.

Indexed Cost Calculation:
The Cost Inflation Index (CII) for 2009-10 is 148, and for 2023-24, it is 348.

Indexed Cost of Acquisition = Purchase Price * (CII of Sale Year / CII of Purchase Year)

Indexed Cost of Acquisition = 29,00,000 * (348 / 148) = Rs. 68,14,865.54

Long Term Capital Loss
Selling Price: Rs. 29,00,000

Indexed Purchase Price: Rs. 68,14,865.54

Long Term Capital Loss = Selling Price - Indexed Purchase Price
= Rs. 29,00,000 - Rs. 68,14,865.54
= Rs. -39,14,865.54

You have a long-term capital loss of Rs. 39,14,865.54.

Using Indexation Option
You can use indexation to adjust the purchase cost for inflation. This helps to accurately reflect the real value.

Booking Long Term Capital Loss
To book the long-term capital loss, follow these steps:

Document the Sale:

Keep the sale deed and bank statements showing the sale proceeds.

Calculate Indexed Cost:

Use the Cost Inflation Index for the purchase and sale year.

File Income Tax Return:

Declare the long-term capital loss in your ITR. You can carry forward this loss for up to 8 years to set off against future capital gains.

Documents Required
Purchase Deed:

Document from 2009 showing the original purchase price.

Sale Deed:

Document from 2024 showing the sale price.

Bank Statements:

Proof of receipt of sale proceeds.

Cost Inflation Index:

Values for 2009-10 and 2023-24.

Interest Proof:

Though interest isn't included in cost calculation, keep proofs for future reference.

Final Insights
You can claim a long-term capital loss of Rs. 39,14,865.54.
Use indexation to calculate this loss accurately.
Maintain proper documents to support your claim.
File the loss in your income tax return to offset future gains.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Asked on - Jul 30, 2024 | Answered on Jul 30, 2024

Thank you sir for your quick response. As per the recent budget, I understood that the indexation has been removed. Could you please clarify it

Ans: You're absolutely right. That's an important detail I missed.

Since you sold the property on July 24th, 2024, the removal of indexation benefits from Budget 2024 applies to your case. This means you won't be able to adjust the purchase cost for inflation to calculate the capital gains.

Here's how this affects your situation:

Original Purchase Cost: Rs. 29 lakhs
Sale Price: Rs. 29 lakhs
Capital Gains: Since indexation is removed, we simply compare the purchase price and sale price.
In this scenario, you don't have a capital gain or loss because you sold the property for the same price you bought it for.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

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