My wife purchased a plot in 2006. Built three 2 story house.Wife expired in 2018.House sold by lega heirs in 2022.Kly advise the LTCG will be calculated on which acquisatin cost in 2006 or 2018.

Ans: In your case, the date of acquisition for the purpose of calculating long-term capital gains (LTCG) will be the year in which your wife purchased the plot in 2006. This is because the plot was acquired by your wife in 2006 and then the house was constructed on it, which became her property. Therefore, the period of holding of the property will be considered from the year in which the plot was purchased by your wife.

If the property was sold after holding it for more than two years from the date of acquisition (i.e. after 2008), then the gains will be considered as long-term capital gains. The LTCG will be calculated as the difference between the sale price of the property and the indexed cost of acquisition.

Indexed cost of acquisition is calculated by multiplying the purchase price with the Cost Inflation Index (CII) of the year of sale and dividing it by the CII of the year of acquisition. The CII is notified by the Central Board of Direct Taxes (CBDT) every year.

It is important to note that LTCG tax rate on the sale of property is 20%, and you can claim exemptions or deductions such as reinvestment of the sale proceeds into another property or investing in specified bonds to lower the taxable LTCG amount.

Ans: If the construction is completed within 3 years of transfer of residential plot, you are not liable to pay tax on LTCG on transfer of plot.

Ans: As per budget proposal, there will not be any indexation benefit so gain will be sales minus actual cost. You have to pay tax @12.5%