am having flat in hyderabad which was registered as gift deed in 2009 and if i want to sell the flat on today date the valve may be 75 Lakhs what can be capital gain. Actual cost was 2.2 lakhs in 1986 . As my age is 65 years and i dont want to use for contruction or investment in new flat. How can i save capital gain. Your advise

Ans: Hi
You may have a long term capital gain of about Rs. 6.70 Lakhs. Suggestions to avoid paying any tax on this gain would be to pay towards the construction of the new house. This would mean that you may need to sell your house before you take possession of the new house in December 2023 and use the sale consideration to pay to the builder to the extent of approx Rs. 6.70 Lakhs to make it eligible as reinvestment in a new under construction property. This cannot be the other way round i.e. you cannot pay full amount to the builder and take possession and thereafter sell the old house.

If you need the house to stay till the possession of the new property then you could try for a rental arrangement with the buyer of your old house.

Ans: To save tax on long term capital gain; you can invest consideration amount to acquire house property and get exemption u/s 54. As per section 54, if you want to buy a residential house property from long term capital gain from sale of house property then you must buy the residential house property 1 year before or 2 years from date of such transfer of shares or construct the house property within 3 years from date of transfer of such property.

Ans: You have to first calculate the capital gains after indexation and than you can either pay tax or invest in capital gain deposits.
Sunil Lala, CFP
https://m.facebook.com/slwealth/

Ans: It is good that you are planning this before selling the property. A little planning now can help you understand your tax liability clearly and avoid costly mistakes later.

» Understanding Your Capital Gain

Since you received the flat through a gift deed in 2009, the date of the gift is not considered for calculating the holding period.
The previous owner's purchase cost and purchase date become important.
As you mentioned, the original cost was around Rs.2.2 lakh in 1986.
Since the property has been held for many years, the gain will be treated as a Long-Term Capital Gain.
As per the current tax rules, the exact tax will depend on the applicable provisions, the sale value, eligible deductions and the method of computation. So, it is not possible to arrive at the exact capital gain without complete details such as stamp duty value, improvement costs, selling expenses and applicable tax provisions.

» Check Whether You Have Any Eligible Expenses

Before calculating the taxable gain, collect all documents related to:
Cost of any major renovations or improvements made over the years.
Brokerage paid while selling.
Legal charges or other expenses directly connected with the sale.
These may help reduce the taxable capital gain wherever permitted under tax laws.

» If You Do Not Want Another House

You have clearly mentioned that you do not wish to buy or construct another house.
In that case, the exemption available for purchasing another residential property will not suit your requirement.

» One Option To Reduce Capital Gain Tax

If your objective is to save tax without buying another house, you may consider investing the eligible capital gain amount in notified capital gain saving bonds, subject to the conditions and investment limits prescribed under the Income Tax Act.
These bonds come with a lock-in period, so your money will remain invested for the specified duration.
This is one of the commonly used options by senior citizens who do not wish to purchase another property.

» Plan The Sale Amount Wisely

After meeting your tax liability, invest the remaining money based on your income needs, liquidity and future goals.
If you need regular income along with long-term wealth creation, well-managed actively managed mutual funds can be considered based on your risk profile.
Instead of investing the entire amount at one time, you may invest gradually if market conditions and your financial plan support it.
This can help manage market fluctuations better.

» Keep Your Retirement Secure

At 65 years, your focus should be on preserving capital, maintaining liquidity and generating reasonable growth.
Keep sufficient emergency money readily available.
Ensure your health insurance is adequate if required.
Review your nomination and estate planning documents so that your assets are transferred smoothly to your family.

» Finally

Based on the details shared, your property sale is likely to result in Long-Term Capital Gain.
Since you do not wish to buy another house, the main tax-saving option available may be investing in eligible capital gain saving bonds, subject to the prescribed conditions.
Before finalising the sale, get the capital gain computation prepared by a Chartered Accountant. A proper calculation can help you claim every eligible deduction and avoid paying more tax than necessary.
Once the tax planning is completed, the balance amount can be invested systematically in suitable actively managed mutual funds to support your retirement income and long-term financial security.

Best Regards,

K. Ramalingam, MBA, CFP,

AMFI-Registered MFD – ARN 4188

www.holisticinvestment.in

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