My father bought a land 0f of 5000 sft for Rs Rs 3500 in 1959.He constructed a 1500sft house on the land in 1967 for Rs 30000 . He passed away in 1986.Self and mother became owner.Mother passed away in 2011and Ibecame the owner. The building and land together was given to a builder in 2015 for construction of flats.As per the agreement I have received 4 flats and construction was completed on 27.11.2021 and handed over to me. Now I have sold one flat (out of four)for 18 lakhs. I want to know whether it will be short or long term capital gain ? I do not want to re invest in property and want to pay appropriate amount of tax .Kindly guide me with procedure.Whether I need to open a separate account in bank and park this money till I pay tax? Thanks. s guha.

Ans: As you must be aware, if person wants save tax on capital gain, person should acquire another residential house within a period of three years from the date of transfer of the old house or should construct a residential house, within a period of one year before or two years after the date of transfer of old house.

With effect from Assessment Year 2021-22, the benefit in respect of investment made in two residential house properties is available. The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of long-term capital gains does not exceed Rs 2 crore.

If assessee exercisesoption, he shall not be entitled to exercise this option again for the same or any other assessment year.

Benefit will be lower of following:

• Amount of capital gains arising on transfer of residential house; or
• Amount invested in purchase/construction of new residential house property

If till the date of filing the return of income, the capital gain arising on transfer of the house is not utilised (in whole or in part) to purchase or construct another house, then the benefit of exemption can be availed by depositing the unutilised amount in Capital Gains Deposit Account Scheme in any branch of public sector bank, in accordance with Capital Gains Deposit Accounts Scheme, 1988.

So in your case, if you satisfy all the prescribed conditions (including acquiring new property within 3 years, depositing unutilised amount in capital gain deposit account and disclosure is made regarding same in ITR of AY 2022-23 & AY 2023-24); you will get IT benefit.

Ans: Your long term capital gains (LTCG) would need to be calculated based on your indexed cost of acquisition of plot, construction and any improvements or alterations done by you of a permanent nature. For doing this, your original costs, inflated by the CII (Cost Inflation Index) as given out by the Govt from time to time is to be used.

The current CII is available from 2001 onwards, while your purchases relate to much earlier. There are ways of handling this including a valuation to be done by a competent professional.

I would recommend you to approach a Govt certified valuer or a CA to evaluate the LTCG in this case.

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.

Ans: There are two events, which are important
1. The event of property registration in your name from the previous buyer - this is an event of transfer and naturally capital gain txn. Since you and your sibliings are the owners of the property now, the tax liability has to be discharged in your sharing proportion.

2. The sale by you all is an event of short-term capital gain again, only if the tax liability is discharged as above, else it would be considered as long - term capital gain.