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

Ramalingam

Ramalingam Kalirajan  |9758 Answers  |Ask -

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
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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
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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
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Hi Mihir, I'm a retired person, 66 years old. Before retirement, I had invested Rs.93.5 lakhs in a commercial real estate in Navi Mumbi in Feb.2017 and registered the property jointly with my wife on 50/50 basis. The value of the property as determined by stamp duty registrar at that time was Rs.73.41 lakhs. The expenses on stamp duty, registration and brokerage was Rs.7.53 lakhs and improvement expenditure of Rs.4 lakhs. So total cost of purchase worked out to Rs.1.09 crores. I sold this property in Feb.2024, exactly after 7 years, for Rs.1.1 crore. Market value (for stamp duty purpose) on this date was Rs.89.89 lakhs. While filing my ITR2 in AY 2024-25, I had split all the above values by 2 and 50% was shown in my ITR2 and the remaining 50% was shown in my wife's ITR2 under CG for showing the capital gain. The system has calculated and shown the capital gain as minus Rs.31.24, i.e. Rs.-15.62 in each of our ITR2. The system has also automatically adjusted my LTCG arising out of other share transactions during the FY. The system allows the remaining loss to be carried forward to next year under CFL. My questions are: (1) Can we both go ahead and finalise & submit the ITR2 as shown above? (2) Can we use the losses carried forward during the next AY to set off our incomes arising out of share market transactions? Thank you so much in advance for your valuable time and advice.
Ans: In the absence of exact dates, i will not be able to check calculation. Please cross check your indexed cost from income tax calculator available at https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx.

Also your wife is required to show said transaction if at the time of acquisition of property she contributed.

Further, long term loss under the head capital gain from sale of house property can be set off against long term gain under the head income from capital gain subject to conditions

..Read more

Samkit

Samkit Maniar  | Answer  |Ask -

Tax Expert - Answered on Jul 25, 2024

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Hi Samkit, I'm a retired person, 66 years old. Before retirement, I had invested Rs.93.5 lakhs in a commercial real estate in Navi Mumbi in Feb.2017 and registered the property jointly with my wife on 50/50 basis. The value of the property as determined by stamp duty registrar at that time was Rs.73.41 lakhs. The expenses on stamp duty, registration and brokerage was Rs.7.53 lakhs and improvement expenditure of Rs.4 lakhs. So total cost of purchase worked out to Rs.1.09 crores. I sold this property in Feb.2024, exactly after 7 years, for Rs.1.1 crore. Market value (for stamp duty purpose) on this date was Rs.89.89 lakhs. While filing my ITR2 in AY 2024-25, I had split all the above values by 2 and 50% was shown in my ITR2 and the remaining 50% was shown in my wife's ITR2 under CG for showing the capital gain. The system has calculated and shown the capital gain as minus Rs.31.24, i.e. Rs.-15.62 in each of our ITR2. The system has also automatically adjusted my LTCG arising out of other share transactions during the FY. The system allows the remaining loss to be carried forward to next year under CFL. My questions are: (1) Can we both go ahead and finalise & submit the ITR2 as shown above? (2) Can we use the losses carried forward during the next AY to set off our incomes arising out of share market transactions? Thank you so much in advance for your valuable time and advice.
Ans: Yes, seems correct treatment done. You can go ahead with submitting your returns respectively.

Please note that Long term losses can only be set off against long term gains, if that's the case then you can.

Please consult your CA before moving ahead.

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Ramalingam

Ramalingam Kalirajan  |9758 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 18, 2024

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Hello Sir, I'm a retired person, 66 years old. Before retirement, I had invested Rs.93.5 lakhs in a commercial real estate in Navi Mumbi in Feb.2017 and registered the property jointly with my wife on 50/50 basis. The value of the property as determined by stamp duty registrar at that time was Rs.73.41 lakhs. The expenses on stamp duty, registration and brokerage was Rs.7.53 lakhs and improvement expenditure was Rs.4 lakhs. So total cost of purchase worked out to Rs.1.09 crores. I sold this property in Feb.2024, exactly after 7 years, for Rs.1.1 crore. Market value (for stamp duty purpose) on the date of sale was Rs.89.89 lakhs. While filing my ITR2 in AY 2024-25, I had split all the above values by 2 and 50% was shown in my ITR2 and the remaining 50% was shown in my wife's ITR2 under CG for showing the capital gain. The incometax system has calculated and shown the capital gain as minus Rs.31.24 lakh, i.e. Rs.-15.62 lakh in each of our ITR2. The system has also automatically set-off my LTCG arising out of other share transactions during the FY against this loss. The system allows the remaining loss to be carried forward to next year under CFL. My questions are: (1) Can we both go ahead and finalise & submit the ITR2 as shown above? (2) Can we use the losses carried forward during the next AY to set off our incomes arising out of share market transactions? Thank you so much in advance for your valuable time and advice.
Ans: Understanding Your Capital Gains Scenario
You invested Rs. 93.5 lakhs in a commercial property in 2017. This property was jointly owned with your wife. The total cost, including expenses, was Rs. 1.09 crores. You sold the property in 2024 for Rs. 1.1 crore. This transaction resulted in a loss of Rs. 31.24 lakh, split equally between you and your wife.

Filing ITR2 with Capital Losses
The income tax system calculated a capital loss of Rs. 15.62 lakh for each of you. This loss has been set off against your long-term capital gains from other share transactions. The remaining loss can be carried forward.

Submit ITR2: Yes, you can finalize and submit ITR2 as shown. The system's calculation is correct.
Carry Forward and Set-Off of Capital Losses
The Income Tax Act allows you to carry forward capital losses for eight years. These losses can be set off against future capital gains.

Using Carried Forward Losses: Yes, you can use the carried forward losses to set off against future capital gains from share market transactions. This helps in reducing your taxable income in future years.
Analytical Insights
Loss Set-Off: By setting off the loss against your other gains, you reduce your tax liability for the current year. This is a strategic move.

Carry Forward Benefit: Carrying forward losses provides a cushion for future gains. It helps in managing tax liabilities efficiently.

Key Considerations
Record Keeping: Ensure you maintain all documents related to the sale and purchase of the property. This includes agreements, receipts, and tax filings. These documents are crucial for future reference and any tax scrutiny.

Tax Planning: Consider consulting a Certified Financial Planner for comprehensive tax planning. They can help optimize your investments and tax liabilities.

Future Investment Strategy
Diversification: Diversify your investments to balance risk and return. Consider mutual funds, bonds, and fixed deposits.

Risk Management: Assess the risk of each investment. Balance high-risk investments with safer options to protect your capital.

Final Insights
Managing capital gains and losses is crucial for effective tax planning. You have used the tax provisions wisely by setting off the losses against other gains. Carrying forward the remaining losses will help reduce your future tax liabilities.

By diversifying your investments and consulting with a Certified Financial Planner, you can optimize your financial portfolio for better returns and risk management.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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