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Mihir

Mihir Tanna  |580 Answers  |Ask -

Tax Expert - Answered on Sep 14, 2023

sadhana Question by sadhana on Sep 13, 2023
Money

I HAVE HOUSE INHERITED AND PAY REGISTRATION FEES OF VALUATION OF VRS. 50,00,000.00 IN THE YEAR 2010. NOW I SOLD IN JULY 2023 FOR A CONSIDERATION 1,50,00,000.00. KINDLY ADVICE ME HOW MUCH TAX I SHOULD PAY

Ans: Cost of original owner is relevant factor. If same is not known or acquired by original owner before 1.4.2001, it is advisable to get valuation as on 1.4.2001.

Further, indexation benefit is available on long capital asset. For which you can use income tax calculator https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

You have to pay tax @20% on Gain (Sale minus Indexed cost)
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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I have bought a plot for Rs.3 Lakhs in the year, 2006 and constructed a house by taking a bank loan of Rs.10 lakhs in the year, 2007. Now, I have sold this house for Rs.80 lakhs in the year, 2023. What are the capital gains tax I should be paying on this? The buyer has paid Rs.75 K towards TDS on this deal and duducted the same from the sale proceeds due to me. Can I claim this TDS from the IT department? Please clarify.
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.
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