I purchased a flat which has been Registered in my name March 23 for Rs.10.15 L. My total expenses ?12.81 for acquiring the flat. The flat has been allotted in Oct 16. Possession given on Nov. 22. Cost of flat has been paid by installment since 2016. I sold the flat on August 23 for a ?17.65 L. Sir here is my question whether am I eligible for indexed price on sale of flat price.

Ans: Hi Thomas
As the base year for Cost Inflation Index (CII) has been reset to 2001, you may need to get a valuation done through an approved valuer to identify the value as on April 1, 2001. If this value is higher than Rs. 2.98 Lakhs then you could use that as the cost.

As regards the general renovation amount spent, it may not be allowed to be added as cost of the property as generally tax officers are not dispensed to allow it.

W.R.T. your decision to reinvest in a ready possession flat within 2 years, please note that if this investment is extending beyond 6 months OR due date for filing your tax returns (whichever is earlier), you would need to open a Capital Gain Account Scheme (CGAS) account with a nationalized bank and park the capital gain amount in it for reinvestment.

Now answering your queries

Query 1 - If the capital gain amount does not exceed Rs. 2 Crores then you could reinvest in 2 residential units. This however is a one time option and cannot be used again in any other year.

Query 2 - Yes you could add their names but they would be treated as name-sake owners and for all purposes of taxation, you would be taxed singly.

Query 3 - You can add their name as proportionate owners to the value of their contribution. The taxation of income in that case would be based on their contribution

Query 4 - The answer to this would depend on the valuation report. Nevertheless, you could derive the indexed cost yourself by multiplying a factor of 3.48 to the cost. An example would be as follows:

Suppose the cost is Rs. 2.98 Lakhs
Indexed cost would be Rs. 2.98 Lakhs x 348 / 100 OR 2.98 Lakhs x 3.48 = Rs. 10.37 Lakhs

Ans: To calculate the indexed cost and capital gains tax on the sale of your flat, we will use the Cost Inflation Index (CII) provided by the Income Tax Department of India.

Here's the step-by-step process:

Step 1: Determine the Purchase Cost and Sale Price
Purchase Cost: Rs. 3,50,000 (February 2002)
Sale Price: Rs. 70,00,000 (August 2023)
Step 2: Identify the Relevant Cost Inflation Index (CII)
CII for FY 2001-02 (the base year for purchase): 100 (as per the updated base year of 2001-02)
CII for FY 2023-24 (the year of sale): 348
Step 3: Calculate the Indexed Cost of Acquisition

Indexed Cost of Acquisition: Rs. 12,18,000

Long-Term Capital Gain: Rs. 57,82,000
Tax on LTCG: Rs. 11,56,400
Therefore, you will need to pay Rs. 11,56,400 as long-term capital gains tax on the sale of your flat.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: The Indian Budget 2024 introduced significant changes to the taxation of Long Term Capital Gains (LTCG) on property:

Removal of indexation benefit: This was the initial proposal.
Option to choose: Due to widespread criticism, the government later allowed taxpayers to choose between a 12.5% tax rate without indexation or a 20% tax rate with indexation.  
Key Factors for Your Case
Date of Sale Deed Registration: This is generally considered the date of sale for tax purposes. In your case, it's July 28, 2024.
Option to Choose: Since your sale deed registration is after July 23, 2024 (when the budget changes were announced), you have the option to choose between the 12.5% tax rate without indexation or the 20% tax rate with indexation.
Considerations and Recommendations
Consult a Tax Professional: Due to the complexity of the situation and potential tax implications, it's strongly recommended to consult a tax professional or chartered accountant. They can provide tailored advice based on your specific circumstances.
Analyze Both Options: Calculate the tax liability under both options (12.5% without indexation and 20% with indexation) to determine the most beneficial choice for you.
Consider Other Factors: Factors like the holding period of the property, the purchase price, and other expenses might also influence your decision.
Note: The sale agreement date (May 6, 2024) might not have a direct impact on the tax calculation in this case.

By carefully considering these factors and seeking professional advice, you can make an informed decision and optimize your tax liability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Using indexation on each cost helps significantly reduce taxable gains. Consulting a tax professional can provide precise calculations based on current CII values.
Your property's value as of this date- Index this amount using the Cost Inflation Index (CII) applicable to 2001 and the year of sale.
Improvement Costs- will also be indexed from year of modification to the year of sale.
Capital Gains Calculation- The difference is the taxable capital gain, which will be taxed at 20% with indexation.
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar

Ans: Hello;

Yes you may pay LTCG @ 20% with indexation benefit.

Or

12.5% without indexation benefit.

Best wishes!!