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Will I be taxed on selling my 70 lakh property for 180 lakhs to buy a 300 lakh property?

Milind Vadjikar |947 Answers |Ask -Follow

Insurance, Stocks, MF, PF Expert - Answered on Sep 24, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more

Question by Om on Sep 23, 2024Hindi

Money

I purchased one property in 2011 for 70 lacs , current sale price is 180 lacs , intend to purchase new property for 300 lacs possion by March 28 while registration shall be done by Dec 24 Pl suggest , will I will be subject to capital gain tax

Ans: Section 54 of the Income tax act allows capital gain exemption to individuals selling residential property in India.

This provision allows you to reinvest the sale proceeds into another residential property in India thereby avoiding capital gain tax payment.

The residential property sold must be long term asset.

You must then buy a new residential property within 1 year before or 2 years after the sale or construct new house within 3 years.

The date of sale agreement and purchase agreement should serve as the proof for the purpose of this date matching however it is appropriate that you seek documented advice from a CA on this matter so as to avoid tax queries later.

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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Question by SUSHIL - May 29, 2023Hindi

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I have purchased a land of Rs. 2.5 Lacs in 2001 and start constructions on that in 2005 with 2 floors and also completed the constructions with in 5 months. Taken a loan from DHFL of Rs. 5 Lac and also repaid in next 2-3 years. Just two years back also extended one floor. Now there is 3 complete floor and one half floor is there. If today I sell this property (which is approx 80 sqyds plot size) in 70 lacs then how much capital gain tax (if applicable) I need to pay. Pl. also note that we don't so much documents for constructions related and total exp. is around 25-30 Lacs on that.

Ans: To calculate the capital gains tax on the sale of your property, 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 land in 2001, which is Rs. 2.5 lakhs.

Cost of Improvement:
The cost of improvement includes the expenses incurred for construction and any subsequent additions or extensions made to the property. In this case, it includes the construction of the initial two floors, the extension of one floor, and any other related expenses. You mentioned that the total expenses were around 25-30 lakhs. Let's assume the cost of improvement is Rs. 28 lakhs.

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 2001-2002 was 100 and for the current financial year, it is 317.

Indexed Cost of Acquisition = Acquisition Cost × (CII for the year of sale/CII for the year of acquisition)
Indexed Cost of Acquisition = Rs. 2.5 lakhs × (317/100) = Rs. 7,92,500

Indexed Cost of Improvement = Cost of Improvement × (CII for the year of sale/CII for the year of improvement)
Indexed Cost of Improvement = Rs. 28 lakhs × (317/100) = Rs. 88,76,000

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. 70 lakhs - (Rs. 7,92,500 + Rs. 88,76,000)
Capital Gain = Rs. -26,68,500 (Assuming the indexed cost is higher than the sale proceeds)

Since the calculated capital gain is negative, it means there is no capital gain tax applicable in this case. This is because the sale proceeds are less than the indexed cost of acquisition and improvement.

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Mutual Funds, Financial Planning Expert - Answered on May 06, 2024

Asked by Anonymous - Mar 29, 2024Hindi

Money

i sold my property for 20 lacs, is it taxable for this year(2024- 2025), since i am a NRI, how much amount I have to pay as capital gain?. How to avoid this capital gain tax, Since i am planning to purchase a new property this year(2024) or 2025 using this money(gained from the property sold recently). Please advice

Ans: As an NRI, any capital gains arising from the sale of property in India are subject to taxation under the Income Tax Act, 1961. Here's how the taxation works and some strategies to minimize your tax liability:

Tax on Capital Gains: The capital gains tax is calculated based on the profit earned from the sale of the property. The gain is classified as either short-term capital gains (STCG) or long-term capital gains (LTCG), depending on the holding period of the property.
STCG: If the property is held for less than 24 months (two years), the gains are treated as short-term capital gains and taxed at your applicable slab rate.
LTCG: If the property is held for 24 months or more, the gains are treated as long-term capital gains. For NRIs, LTCG on the sale of property is taxed at a flat rate of 20%, with indexation benefits available.
Indexation Benefit: Indexation allows you to adjust the purchase price of the property for inflation, thereby reducing the taxable capital gains. This helps in minimizing the tax liability on long-term capital gains.
Exemptions and Deductions: Under Section 54 of the Income Tax Act, you can claim an exemption from LTCG tax if you invest the proceeds from the sale of the property in another residential property within a specified period. The exemption is available if the new property is purchased within one year before or two years after the sale, or within three years for under-construction properties. The entire amount of LTCG or the cost of the new property, whichever is lower, is eligible for exemption.
Capital Gains Account Scheme (CGAS): If you are unable to reinvest the proceeds from the sale immediately, you can deposit the gains into a Capital Gains Account Scheme (CGAS) with a designated bank. The amount deposited in the CGAS must be utilized for purchasing a new property within the specified time frame to claim the exemption.
Tax Consultation: Since tax laws can be complex and subject to change, it's advisable to consult with a tax advisor or chartered accountant specializing in NRI taxation. They can provide personalized advice based on your specific situation and help you navigate the tax implications effectively.
By planning your property transactions strategically and leveraging available tax-saving provisions, you can minimize your capital gains tax liability and maximize your returns from the sale of property.

Milind Vadjikar |947 Answers |Ask -Follow

Insurance, Stocks, MF, PF Expert - Answered on Oct 14, 2024

Asked by Anonymous - Aug 04, 2024Hindi

Money

I bought a property in 2006 for 15.21 lacs. Now I am willing to sell it at current rate which is around 1.30 cr. How much tax would I need to pay as capital gain?

Ans: Hello;

12.5% on 1.1479 Cr: 14.34 L

OR

20% on 82.82 L (Gain arrived after deducting Indexed cost of acquisition from sale price): 16.56 L

Kindly consult a CA for detailed working and suitable guidance.

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You may plan your investments as 50% in a flexicap type mutual fund and 50% in large cap type mutual fund.

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Hi Sir. I am a 37 year old woman, single (unmarried) living with my mom, my younger brother and sister in law. I recently went through a layoff. This is my current portfolio, if you can advice if this is good or needs any adjustments and can help me plan my savings better. My usual monthly spends on an average is around ₹35-40,000. Current portfolio till date PPF ₹8,00,000 LIC Jeevan Anand 149 policy (₹4,00,000) PF ₹12,00,000 FD ₹31,00,000 MF ₹2,70,000 (current value) lump sum invested in Nippon Tax saver, ICICI prudential long term Tax Saver and Axis Long term Tax Saver Funds Savings Account ₹37,66,000 Gold ₹30,00,000 (bought jewellery)

Ans: Hello;

You may keep max 3-4 L in your savings account and invest the balance funds in mutual funds as per your risk profile.

Apart from this you need to continue with PPF and open NPS account and invest regularly for retirement planning.

Do not fall for any endowment insurance policies because they provide abysmal return on your investment.

It is your personal choice to buy gold jewellery as much as you like but for investment sake best way to invest in gold is through SGBs or gold mutual funds.

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Question by Debalina - Jan 30, 2025Hindi

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Question by Harsh - Jan 29, 2025Hindi

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Your parents possibly don't want you to go through the disappointment all over again and feel that a regular degree will get your feet back on the ground. Now, whether you must write NEET again or not is a decision you will have to take BUT only if you have a firm plan in hand. You will need to get back all your focus and give it your best shot. Now, how important is this exam for you and why you want to take it, is something only you know. You will also need your parents' support in case you decide to go for it after all, so also consult with them. If you are able to inspire yourself, then you know what is to be done.

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Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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Relationships Expert, Mind Coach - Answered on Jan 31, 2025

Asked by Anonymous - Jan 27, 2025Hindi

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I am 48, male, divorced from my wife. I have a 12 year old daughter. I am in love with a colleague in my office who is also married and seeking divorce. We have known each other for 3 years. Her husband recently found about us and has since decided to delay the divorce proceedings. He is not consenting for mutual divorce. While we love and support each other, this new development is now affecting our relationship. Her husband doesn't appreciate us meeting or talking at work or texting each other. He is unecessarily harassing her to make it seem like I am the villain and she should feel guilty about choosing to divorce at the age of 45. I don't see how it is my fault. But I don't want her to go through this pain of dealing with a guy who she doesn't want to live with. Please suggest what I can do to help.

Ans: Dear Anonymous,
What can you do other than just be by her side and simply understand her situation?
Her husband perhaps feels threatened by another male stepping in and hence delaying the divorce or not consenting to it will drag this whole thing...On your part, do not get so emotionally invested that it begins to take a toll on your peace of mind. This situation isn't going to be an easy one and it will just stretch your emotional band very thin; both for you and the lady. So, take it slow and it may help not being in the radar much so that the husband also backs off. It's sadly called - playing games.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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