I am a NRI and recently sold my apartment in Bangalore and have few questions on computation of LTCG tax.

1. To calculate ‘cost of acquisition” should I include stamp duty which I had paid?

2. I had to travel to India to complete the sale paperwork and can I deduct this as expense incurred exclusively for transfer?

3. Is the entire amount (less than 50L) invested in 54EC eligible for deduction?

Ans: With reference to the query of stamp duty, yes, it can form part of the cost of acquisition. However, you must be aware that stamp duty paid at the time of purchase is allowed as deduction u/s 80C. Thus, an argument can be raised that if it is added to the cost of acquisition, it will result in double deduction.

With reference  to travel expenses, in my view you should not claim said expenses as Expenditure incurred are not wholly and exclusively in connection with transfer of capital asset.

With reference to investment in bonds specified in Sec 54EC, NRIs are not eligible to invest in certain specified government bonds.

Ans: For calculating tax on long term capital gain on house property, indexed cost of acquisition is required be reduced from sale considered.

Indexed cost of acquisition can be calculated with the help of income tax calculator available at https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx.

Property is booked in 2004 but payment would have done gradually till 2014. Thus, indexation benefit is available on each of the payment from each of date of payment.

Ans: LTCG Tax Applicability for Your Scenario
Based on the information you provided, here's how LTCG tax will likely apply to your situation:

Old Flat Sale:

You booked the flat in Nov 2009 and took possession in Nov 2011. Since the sale will happen after 2 years from possession (Nov 2011), it qualifies as Long-Term Capital Gain (LTCG).
LTCG on the sale of the old flat will be calculated as follows:
Sale consideration (estimated): Rs 1.2 Cr
Cost of acquisition (including stamp duty, registration charges etc. incurred in 2009): Let's say Rs 65 Lakhs (approximate figure, you'll need the actual amount)
LTCG = Rs 1.2 Cr - Rs 65 Lakhs = Rs 55 Lakhs
Tax on LTCG:

There are two ways to potentially reduce or eliminate your LTCG tax liability:

Section 54: This section allows exemption of LTCG on the sale of a residential property if the capital gains are invested in a new residential property within one year before or three years after the sale. In your case, since you plan to buy a new flat with some of the proceeds (Rs 1 Cr) within the prescribed timeframe (agreement in Dec 2024, which falls within 3 years of the sale in July 2024), you can potentially claim exemption under Section 54 for a portion of the LTCG (up to Rs 1 Cr).

Capital Gains Tax with Capital Gains Bonds (Section 54EC): If the investment in the new flat falls outside the window for Section 54, you can explore Section 54EC. This section allows investing LTCG in specific government bonds within 6 months of the sale to get exemption. However, the bonds typically have a lock-in period of 3 years.

New Flat Purchase:

The purchase of the new flat itself won't have any tax implications unless you decide to sell it in the future.

Important Points:

The actual cost of acquisition for the old flat will be crucial for calculating the exact LTCG amount.
Consult a tax advisor for a more precise assessment of your tax liability considering all the details and claiming exemptions effectively. They can advise you on the best approach based on your specific situation (e.g., Section 54 vs. 54EC).

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in