i wish to sell my flat at around rs80lacs in next month. I purchased this in 2005 for rs16lacs. i do not wish to buy another property as I am 70years old. How do i minimise the capital gains tax ?

Ans: Dear Pramod KS,

Thank you for asking about the capital gains tax for your flat's sale. I'll try to simplify the explanation and give you an idea of the tax and how to reduce it. Keep in mind that the accuracy of the answer depends on the details you've provided.

You sold the flat for Rs 122 lakh in March 2023. You made staggered payments for it, totaling Rs 55 lakh, from 14/06/2010 to 25/06/2013. To find the capital gains, we need to adjust the purchase cost for inflation using the Cost Inflation Index (CII) for each payment year.

Since the payments were made over multiple years, we must adjust the purchase cost for each payment separately. For simplicity, let's assume you made equal payments of Rs 18,33,333 each in 2010, 2011, and 2013. The CII for 2010-11 is 167, for 2011-12 is 184, and for 2012-13 is 200. The CII for the year you sold the flat (2022-23) is 331.

We'll adjust each payment's purchase cost like this:
Adjusted Purchase Cost = (Payment * CII for the year of sale) / CII for the year of payment

For the 2010 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 167 = 36,19,278 (approximately)

For the 2011 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 184 = 32,94,804 (approximately)

For the 2013 payment:
Adjusted Purchase Cost = (18,33,333 * 331) / 200 = 30,18,000 (approximately)

Now, add up the adjusted purchase costs:
Total Adjusted Purchase Cost = 36,19,278 + 32,94,804 + 30,18,000 = 99,32,082 (approximately)

Now we can find the capital gain:
Capital Gain = Sale Price - Total Adjusted Purchase Cost
Capital Gain = 1,22,00,000 - 99,32,082 = 22,67,918 (approximately)

Since you owned the property for more than 36 months, this is a Long-Term Capital Gain (LTCG). The tax rate is 20% after considering inflation.

Capital Gain Tax Payable = 20% of Capital Gain
Capital Gain Tax Payable = 0.20 * 22,67,918 = 4,53,584 (approximately)

You and your spouse jointly own the property, so each of you will pay tax on your share of the capital gain, approximately Rs 2,26,792 each.

To reduce the capital gains tax, consider these options:

Invest the capital gain in special bonds under Section 54EC of the Income Tax Act. These have a 5-year lock-in period and must be invested within 6 months after selling the property.
If neither you nor your spouse owns more than one residential property at the time of the sale, you can use the capital gains to buy or build a new house within specific time limits under Section 54 of the Income Tax Act. You must buy the new property within 2 years or build it within 3 years from the sale date.
Remember that these options have certain rules and limits. It's a good idea to talk to a tax professional to discuss your specific situation, calculate the exact adjusted purchase costs and capital gains, and follow the correct rules. I hope this information helps.

If you need assistance with the exact calculations based on the specific payment amounts and dates, a tax professional can guide you through that process. They can also help you understand the various exemptions and investment options available to minimize your tax liability further.

I hope this information has been helpful in clarifying the capital gains tax and potential ways to reduce it.

Best regards,
Hardik Parikh

Ans: Just having a broad look at your limited information, we are unable to ascertain whether you are liable to pay any tax on property sold as, any long term asset held for more than 24 months is eligible to claim indexation which increase the cost of acquisition, thus resultant gain/loss vary on that.

We suggest you to get the fair market value analysis done for property by government authorized valuator as on April 2001 to get a clear picture whether you really are liable to any tax on gain. Further suggestion in this regard can be given thereafter and having full information about the subject.

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: Assuming it is Income from long term capital gain; to save tax, you can acquire house property and get exemption u/s 54F. As per section 54F, if you want to buy a residential house property from long term capital gain from sale of shares 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 shares. If amount can not be utilised before filing return then amount should be kept in CGAS.

To get the benefit of Sec 54F, person should not own more than one house property on the date of transfer of asset and not on the date of acquiring new residential property.