76 Comments

1. Anand on August 9, 2019 at 3:07 AM

   Hello Sir,
   I have purchased resale flat in 19/12/2013 for Rs. 3050000, + (stamp duty and registration charges) 7% which is 213500 + (other charges to Cidco NOC) 25000 + (Society NOC) 25000 + 2% (brokerage but receipt not available) 61000 = 3374500
   Planing to sale this flat for Rs. 4250000
   Till date I have paid Rs. 1299705 Interest to Home loan on the same house.
   Based on above am I need to Pay capital gain tax and How much ?
   Can I use this balance capital after paying home loan amount for other purpose instead of purchase new home?

   Thanks,
   Anand

   Reply
2. Umesh on October 9, 2018 at 10:17 AM

   Hello,
   My father had bought a land in the year 1973 for a cost around Rs. 3000. He constructed house in the year 1980 for a total cost of Rs. 45000. Later in the year 1996 he extended the house for a cost Rs. 45000 and in the year 2006 again the cost was 2.5 lakhs. In between he has spent around Rs 1 lakh on renovation. In Sept 2018, he sold the property for Rs. 49 lakhs. In this case how to calculate capital gains.

   Best Regards

   Reply
   • bemoneyaware on October 10, 2018 at 6:28 AM

     For properties purchased before 1 Apr 2001, as the latest cost inflation numbers start from 1 Apr 2001, one needs to first arrive at what is commonly known as Fair Market Value (FMV) of the property as on April 1st, 2001. Our article Fair Market Value: Calculating Capital Gain for property purchased before 2001 explains it in detail.
     After 2001 you can include the cost of improvement of house.

     Reply
3. Sanjay on August 21, 2018 at 12:53 AM

   Hello,
   I am an NRI (OCI holder) in the USA. I have a piece of land 350 sq yd alloted by HUDA in gurgaon in year 1996 and possession was offered in yr 2001 but I took possession in yr 2004 and conveyance deed was made that time. The total cost was 9 lakhs plus 2 lakhs interest that I paid due to late payment. As well, non-construction (extension of time) charges were almost 6 lakhs on top of the cost.

   My question is if valuation as of Apr 1, 2001 is required if I sell the vacant plot (no construction no wall etc. just the plot) it this year considering the allotted date of yr 1996 or if it is not required and i take the index values from possession date until now for capital gain calculation? Kindly respond urgently.

   Thanks & Regards

   Reply
   • bemoneyaware on August 21, 2018 at 5:30 AM

     Capital gains on transfer of property have always been a reason for dispute between taxpayers and authorities. While the Income Tax Act (I-T Act) mentions that the period of holding determines the amount of tax payable, it does not specify from when the period of holding starts. Does it start from the date of allotment or from the day the sale deed is signed or when a property is registered?

     Difference between taking Purchase in 2001 vs 2004 will be the capital index used. Indexed Purchase price=Purscahse Price X 280/CII of Purchase Year
     CII of the Purchase Year 2001 is 100
     CII of the Sale Year 2018 is 280
     CII of the Purchase Year 2004 is 113
     Assuming 9 lakhs Indexed Purchase price in 2001=900000X280/100=25,20,000
     Assuming 9 lakhs Indexed Purchase price in 2004=900000X280/113=22,30,088.50
     So capital gain would be more if the purchase price is 2004.
     The starting date for the holding period also continues to be a matter of litigation because of different rulings from high courts and Income Tax (I-T) tribunals. The most common view, however, is that the date of allotment should be considered for determining the holding period rather than the date of possession.
     But the allotment date can come in question, depending on the terms and conditions mentioned in the allotment letter. The seller needs to ensure that the terms of payments and the conditions laid down for sale can help him defend his position in front of tax authorities.

     Calculating capital gains

     –– ADVERTISEMENT ––

     On transfer of property, the seller has to pay capital gains tax.
     In the Finance Act, 2017, the holding period of immovable property has been reduced from 36 months to 24 months for it to be considered as a long-term capital asset If the asset is held for not more than 24 months, one has to pay short-term capital gains (STCG) tax. In this case, the profits are clubbed with the income and the seller has to pay tax according to the applicable slab. If the seller has held the property for more than 24 months, he needs to pay long-term capital gains (LTCG) tax. For this, he has to use the cost inflation index and pay 20 per cent tax on gains calculated.
     recently Mumbai ITAT also gave an order — Anita Kanjani, Mumbai, vs ACIT 23(1) dated February 13, 2017 — in favour of the taxpayer. It helps the assessee to support the position that for determining the period of holding, date of allotment should be considered.
     Even CBDT had issued a circular in the past, where it clarified that the period of holding of the property booked by an assessee under self-finance scheme of Delhi Development Authority will be counted from the date of issuance of allotment letter.

     While there are enough judgments that say that holding period starts from the date of issuance of allotment letter, litigation from the tax authorities cannot be ruled out because of a few conflicting orders.

     Orders that work in your favour
     The intention of the law in using the word “held” indicates that the legal ownership of the asset is not the main criteria for determining holding period
     An allotment letter means that the buyer has the right to hold the property. Execution of sale deed, therefore, at a subsequent date is irrelevant
     It is not necessary that the buyer needs to be the owner of the asset with a registered deed of conveyance to determine the holding period

     Reply
4. madan on August 8, 2018 at 5:39 PM

   Sir
   I purchased one flat in 05/05/2005 ( agreement date ) & sold it on 18/06/2018 . The purchase cost was 11 lakh ….I incurred other expenses as : cost for registration , stamp duty ,electrical connection , electrical fitting ,woodwork , paint , other civil work charges in between 2005 to 20018 . But there are no bill or documents for those expenses except registration & stamp duty documents . Can I show the expenses without bill / documents in the head of cost of improvement & expenses related to sale / transfer ? OR what such expenses I can include in the acquis?ition cost for calculating LTCG

   Reply
   • bemoneyaware on August 10, 2018 at 5:06 AM

     Any expenses which are attributable to the purchase of property are allowed to be added in the cost of acquisition of the property. Hence, expenses like stamp duty, freehold charges, etc., will be added to the cost of the property.
     The resultant amount shall be indexed as per the Cost Inflation Index notified by the government at the time of sale to calculate the capital gains. However, these payments must be evidenced by the proof of actual payment.
     If you don’t have bills and just in case there is a scrutiny and you have to provide bills how will you justify it.

     Reply
5. Kaushal Kumar on February 26, 2018 at 5:37 PM

   22 decimals (1 decimal=435.6 sq ft) property bought by my mother in 1991 for a total price of 1.32 lakhs.
   The total cost of the property now as per circle rate is 1 crore.
   Property is in the name of my mother who wants to gift it in 2018 to Kaushal Kumar (HUF) which comprises of me, my wife and my daughter as co-parceners.
   I want to sell the property received as gift immediately (i.e. in 2018 itself) after the property is transferred in the name of Kaushal Kumar (HUF).
   What would be the tax liability.

   Reply
6. Vivek Balakrishnan on February 27, 2017 at 7:18 AM

   Can we use Indexation benefit on Cash Certificates issued by banks for a period of 3+ years?

   Reply
7. Deep on December 27, 2016 at 11:56 AM

   Hello Sir,
   I had booked a house in 2010 for the total cost of 60 Lacs [Basic cost + Development charges + VAT and Service Tax]and received an allotment letter in March 2010 along with signing the sale agreement upon paying 20%. The rest 80% was funded by bank for which I have paid in total 19 Lacs interest so far till 2016. Hence, the total cost of the property including the home loan interest is no2 80 Lacs. I have a buyer and we might get into the sale with the value of Rs. 92 Lacs hence need advice and clarification on following …

   1- How should I claim the capital loss after using the cost inflation index number?
   2- Which year CII should I use to calculate the capital loss/gain? Is it 2010 when I got the allotment or 2016 March when I got the possession of property and various payments were made to builder between 2010 – 2014?
   3- Can the home loan interest paid to Bank be added to total cost of the property to calculate the capital gain/loss?

   Regards
   Deeep

   Reply
8. Mandar on November 19, 2016 at 10:08 PM

   Is cii valid on commercial property like industrial unit.

   Reply
   • bemoneyaware on November 20, 2016 at 4:05 AM

     Yes CII is valid on commercial property.
     Income from house property in general, is taxable under the head ‘Income from House property’ in the hands of the owner. This applies to both, residential as well as commercial property . The amount of rent received or reasonably expected to be received from such a property which is known as ‘annual value’, is taxable under this head after the deduction of certain expenses.
     or calculating the income taxable under the house property head, the taxation laws allow you two deductions. The first deduction is the standard deduction in respect of repairs, etc., at the flat rate of 30 per cent of the annual val ue calculated as above. The deduction in respect of a let-out commercial property or a residential property which is deemed to have been let-out, is available whether you have actually incurred any expenditure on repairs or not.The other deduction available is in respect of interest on loan taken to purchase or con struct a house property , or even for repair or reconstruction of your existing property .
     Sale proceeds from commercial property are eligible for tax exemption under section 54F
     
     * Show proof that property is used solely for commercial purposes

     * Use documents like water supply bills, planning permits, rent agreements

     Reply
9. Pramod Mohana on October 27, 2016 at 1:35 PM

   I purchased a plot in may 2012 in Rs 7.30 lakh. I sold it in September 2016 in Rs 15.oo lakh. And purchased a under construction house with land for built my own first residential house in Rs 19.00 lakh. New plot have a valid map of new 3 bhk construction. But Only 1 room , toilet and boundary wall is completed.Can I be free for LTCG in this level,

   Reply
10. Pramod Mohana on October 27, 2016 at 1:31 PM

    I purchased a plot in may 2012 in Rs 7.30 lakh. I sold it in September 2016 in Rs 15.oo lakh. And purchased a under construction house with land for built my own first residential house in Rs 19.00 lakh. New plot have a valid map of new 3 bhk construction. But Only 1 room , toilet and boundary wall is completed.Can I avail for LTCG in this level,

    Reply
11. akshay rathi on September 10, 2016 at 10:39 AM

    Wether i would get benefit of taking cost or fmv in 1981. if i had an ancestral land which was acquired by my ancestor free of cost in 1945 ??

    Reply
12. Kshitij on September 1, 2016 at 2:17 PM

    If I am an NRI investing in open-ended Debt Mutual Funds, can I avail indexation benefits after 3 years. On most of the Mutual Fund websites, they have mentioned that for unlisted non-equity funds, the tax applicable is 10% without indexation. Are open-ended Mutual Funds listed funds or unlisted funds and will I be able to avail of indexation benefits?

    Reply
    • bemoneyaware on September 2, 2016 at 5:30 AM

      Yes Sir you can avail indexation benefits on open Ended Mutual funds after 3 years on Debt Mutual Funds. Open Ended Mutual funds are listed funds.
      Mutual Funds in India are governed by the SEBI (Mutual Fund) Regulations 1996 as amended from time to time. SEBI registered mutual funds are listed and available for trading in the capital market segment of the Exchange. The list of such units listed on the Exchange and available for trading as on date is available at the following URL : http://www.nseindia.com .
      Wanted to bring to your attention the TDS part on redemption of Mutual funds for NRI.
      NRI investment in mutual fund is subject to tax. Considering your status as an NRI, applicable tax on gains will be deducted at the time of your redemption. In any of the above cases if the tax liability on your investment is less than the amount of tax deducted at source then you can file your income tax refund to get refund from income tax department
      capital gains are divided into 2 parts, short term capital gains and long term capital gains.

      Short term capital gains

      Units of Non-equity oriented scheme such as debt and money market mutual funds should be taxed as per your income tax slab, but the TDS is deducted at the highest applicable rate of 30%, irrespective of what tax slab you belong to; while the units of Equity oriented mutual funds are taxed @ 15%.

      Long term capital gains

      Units of Non-equity oriented scheme if listed are taxed at 20% with indexation whichever is lower but the portfolio manager will deduct TDS at flat rate of 20% for NRIs.

      Units of a non-equity oriented scheme if unlisted are taxed at 10% without indexation while Long Term capital gains on units of an equity oriented scheme are exempt from tax as Securities Transaction Tax is payable on redemption.

      Reply
13. Rohit on August 18, 2016 at 1:16 PM

    While calculating indexed cost of purchase of property in can I add MSEB Meter
    charges to the cost of purchase?

    Reply
14. Laxman Saple on August 10, 2016 at 5:25 PM

    I have purchase the property in 2012 for 3900000/- and sold the same in 2014 for 5650000/- against this I have repaid my loan of 2500000/- and remaining amount I purchase another property. Should I need to pay capital gain tax or not??

    Reply
15. K Narayanan on July 20, 2016 at 6:32 AM

    I purchased a flat from Tamilnadu housing board by hire purchase scheme in May, 1977 by paying monthly instalment of ₹.252/ – for a total cost of ₹.32150/-. The said flat was registered for the said amount in May 1999. Now I am intend to sell the flat for ₹. 80,00,000/-. Kindly let me know how much is the Capital Gain and tax there on.

    Reply
16. Monish jain on July 18, 2016 at 11:39 AM

    is indexation benefit available on zero coupon bonds

    Reply
    • bemoneyaware on July 18, 2016 at 12:09 PM

      As there are no coupon payment in zero coupon bonds, these bonds are taxed under the head income from capital gains. Long term capital gains attract indexation benefits, i.e, the tax rate is 20% with indexation and 10% without indexation. In case of short term capital gains it will be included in the investor’s total income and tax rate will be as per the tax slab in which the investor falls.

      Illustration :

      For example, 2 year zero-coupon bonds with a face value of Rs. 1000/- purchased for Rs 910/- or a 2 year 5% annual coupon bond trading at its face value of Rs. 1000/-. If the investor bought the zero-coupon bond for Rs. 910/- would receive Rs. 1,000/- at maturity, which is a gain of 9.9% (90/910). Similarly, if the investor bought a coupon bond, would receive two coupon payments of Rs. 50/- each during the year with a total of Rs. 100/-, which represents a 10% gain(100/1000). Taxation for zero coupon bonds without indexation would be @10% i.e. Rs 9/- whereas for coupon bond@30% i.e. Rs 30/- (assuming the investor falls under the highest tax bracket).

      So Post Tax return (2 Year) on Zero-coupon Bond: 8.9% and
      Coupon-paying Bond: 7%

      Reply
      • Monish jain on July 18, 2016 at 12:55 PM

        I had ZCB(s) which were purchased in october 2013 so can i pay tax on them @20% with indexation…???

        Reply
17. Darshan Mehta on July 15, 2016 at 4:35 AM

    Calculation of Tax liability for Different Purchase Dates as in case of Stocks

    If you have bought :

    1000 units at Rs. 10 on 15 Jan 2006,
    1000 more units at Rs. 12 on 1 May 2010
    1000 more units at Rs. 16 on 1 Feb 2011
    and sold

    2500 units at Rs. 18 on 20 Feb 2012,
    Each purchase/sale transaction is matched on a First-In-First-Out basis(FIFO). So Three cases arise.

    No of Shares Purchase Details Sale Details Indexed Purchase Price/share Indexed Capital Gain Non-Indexed Capital Gain
    1000 Rs 10 in 15 Jan 2009 Rs 18 on 20 Feb 2012 10*785/497=15.795 (18-15.795)*1000=2205.23 (18-10)*1000=8000
    1000 Rs. 12 on 1 May 2010 Rs 18 on 20 Feb 2012 12*785/711=13.2489 (18-13.2489) *1000=4751.05 (18-12)*1000=6000
    500 Rs. 16 on 1 Feb 2011 Rs 18 on 20 Feb 2012 16*785/711=17.6653 (18-17.6653) *500=167.37 (18-16)*500=1000
    Total

    In this case study u were writing purchase unit is year of 2006 and at that time u wrote year of 2009 why Can YOU clarify.

    Reply
18. RAMESH H RATHOD on June 16, 2016 at 11:16 AM

    I have purchased some shares in 2007 wherein indexation cost taken or not thereafter sale of shares

    Reply
    • bemoneyaware on June 17, 2016 at 11:04 AM

      No tax on long-term capital gains from sale of listed shares.
      As you have sold the shares after holding for more than 12 months from when you acquired them, the gains, if any, from the sale will be termed as long-term capital gains (LTCG). The LTCG from sale of listed shares liable to STT can be claimed as exempt from tax under section 10(38) of the Income-tax Act, 1961. Further, the amount of exemption should be disclosed in your personal tax return to be disclosure compliant.

      Reply
19. mahantesh naganure on March 12, 2016 at 7:55 PM

    Hi Team, I have purchased A property in 2006 for 16.7 Lakhs and then took 26 Lakhs top up loan on A for refurbishing A and other flat B related work. Now I am planning to sell property A.. Is it possible to use capital gain amount to replay TopUp loan on property A. Kindly reply quickly.

    Regards
    Mahantesh

    Reply
20. navi reddi on January 9, 2016 at 8:56 PM

    hi bemoney aware… i bought this land of 1402 sq.yrds in hyderabad on 5th march 2007 for 28,04,000/- rs. which i sold on 26th october 2012 for an amount of 42,06,000/-….i have also payed stamp duty of 2,65,940/- for transfer of property …can u pls let me know what capital gains i would have had to pay till that date of october 2012, and also the amount of fine i would have to pay for late payment of my capital gains till this present date of january 2016 if any at all….thanks much…navin reddi

    Reply
21. Srinivas on November 28, 2015 at 7:24 PM

    Sir.
    I bought property in Banglore for 25L in Jun 2011 (index 785).selling in Jan 16.. (index 1081).so 25*1081/785=34.42L.. the buyer is maki g an agreement for 40 L to ge a loan..but sale deed is for 38 L. Is this ok? Also outstanding loan payment can it be deducted fm the sale..in the above case what is my cap gain? How to avoid? Pl reply..

    Reply
22. naman on September 28, 2015 at 12:16 PM

    Thanks for providing me a detailed info. About CII.

    Reply
23. Sachin on September 9, 2015 at 12:17 AM

    Nice article…I have following query too…
    My grandparents purchased a property in the year 1966 for Rs. 9050 (nine thousand and fifty rupee only)and today we sold it around for Rs. 50,00,000 (Fifty Lac only). While calculating the capital gains, I found “Improvement” clause where we can claim an amount spend on property to maintain or construct during the period of we had property.
    Question – how it can be proved whether we have spent the amount? As it was my grandparents maintained that property so I am neither aware or have any proofs to show if 1 lacs or 10 lacs were spent in which year. How can I show it?

    Ques 2. Property sold is 50 lacs, and shows a capital gain of 5 lacs then what is my liability in following cases-:
    a. new property purchase (resident sold and purchased) of 40 lacs.
    b. new property purchased of 50 lacs or above.

    thanks

    Reply
24. DESIKAN on September 4, 2015 at 6:57 PM

    I am planning to sell my land and want to invest the same in another land near to my house to avoid LTCG. Can I claim exemption by investing in another vacant land or should the CG be invested only in residential property to claim exemption. Pls clarify.

    Reply
    • bemoneyaware on September 4, 2015 at 8:48 PM

      laim of exemption u/s 54 would be available on the investment made by you on the land provided you also construct a residential house within the time stipulated in the said section.

      You may also note that section 54 would require an investment in capital gain account scheme if the reinvestment is not made before the time stipulated in filing the return u/s 139(1).
      If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions

      (a) You purchase ONE house within 1 yr before date of transfer or 2 yrs after, or construct ONE house within 3 yrs after date the transfer.

      (b) You do not sell this house withing 3 yrs of purchase or construction

      (c) This new house purchased or constructed must be situated in India

      (d) You should not own more than 1 residential house (other than the new one) on the date of transfer

      (e) You do not purchase within a period of 2 yrs after such date or construct within a period of 3 years after such date any residential house (other than the new one).

      When you satisfy these conditions, and invest entire sale proceeds towards the new house – you won’t pay any tax on your gains. However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption = cost of new house x capital gains/net consideration.

      Reply
25. Bhargav, S on August 8, 2015 at 9:27 AM

    In this example, If P and Q are in US $.
    DO i use Rs conversion rate of year A for P and rate of year B for Q.
    Or should i use rate of conversion of date of sale for both P and Q.

    Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
    Sale Year = B, Selling price = Q, CII for sale year = Y
    Indexed Purchase price = P x (Y/X) = R
    Long term capital gain = Q – R = S
    Income tax on capital gain = S x 20%

    Reply
    • Neela on August 13, 2015 at 11:49 AM

      I have short term capital loss from Debt funds. Should I use item 5 under short term capital gains section of Schedule CG to fillin the details?

      Reply
26. balu on August 6, 2015 at 12:57 PM

    money retained abroad and used for investment in foreign shares and mutual fundsin foreign currency and brought to India after few years. Due to currency fluctuation there is a considerable increase in the value ofmoney brought in. is the gain long term capital gain? Can I claim indexation benefit on the same?

    Reply
27. Ram on August 6, 2015 at 10:37 AM

    Dear Sir,

    I had Purchased certain no of Listed Company shares during 1993 thro IPO.
    I have sold a part of my holding in Stock Exchange during this FY . IPO value offered to the Public and Purchased by me at that rate was Rs130. Current value is around 700.
    How much Capital Gains do I need to pay ?

    Grateful for your reply

    Thanks
    Ram

    Reply
    • bemoneyaware on August 6, 2015 at 12:52 PM

      Long term capital gains from equities are not taxed if shares are sold through recognized stock exchange and Securities Transaction Tax, or STT, is paid on the sale.

      You show the profit :(Selling price-cost price* * price of share as exempt income in ITR.

      Reply
28. Ram on August 6, 2015 at 10:35 AM

    Dear Sir,

    I had Purchased certain amount of Listed Company shares during 1993 thro IPO.
    I have sold a part of my holding in Stock Exchange. IPO value offered to the Public and Purchased by me at that rate was Rs130. Current value is around 700.
    How much Capital Gains do I need to pay ?

    Grateful for your reply

    Thanks
    Ram

    Reply
29. Ranjan on July 31, 2015 at 5:50 PM

    I purchased a flat in Sept 2010. It took more than 3 years for the builder to construct the building. I paid multiple demands from the builder over the period of 3 years (through bank loan). The flat was finally handed over in Feb 2014.
    For the indexation purpose, what would be the ‘property acquired year’? 2010 – when I did the agreement with the builder?
    2014 – when I got the possession?
    Or should every instalment be considered separately and the year of instalment be considered?

    Please advise.

    Reply
    • bemoneyaware on August 1, 2015 at 4:51 AM

      There are debates on it.

      Short ans:
      If the Allotment Letter specifically mentioned the Flat No. allotted to you, that means that you have got a right over that flat.

      And therefore, in this case – the Date of Acquisition would be considered as the Date on which the Allotment Letter was given to you.

      Long ans:
      ref:Taxfull
      Tax authorities in India are taking a position on the basis of various judgments, that the facts of the case are given a priority to consider the availment. For instance, to qualify the investment in case of builder flats, the crucial date is the date of allotment of the residential flat and the payment of installment is a follow up action.
      Allotment is a sufficient compliance for getting the benefits, even if the taxpayer has not paid all installments due under the said scheme. The provisions of the section are a beneficial provision for promoting the construction of residential house. Thus, the date of issue of an allotment letter gives a right to the taxpayer (Intended buyer) to obtain conveyance on the said flat so that it becomes an asset within the purview of the Income-tax Act. The date of acquisition of the said flat shall be the date on which the allotment letter is issued to the intended buyer.

      In the present case the gains will be treated as long term capital gain and you can avail indexation benefit.

      The Central Board of Direct Taxes (CBDT) has also clarified that to qualify as an investment for construction under section 54F the crucial date is the date of allotment of flat by an institution and payment of installments was only a follow-up action and taking possession of the flat is only a formality.

      Reply
30. Prashad on July 31, 2015 at 10:17 AM

    Hi, Do I have a choice to calculate long term capital gain for my Real Estate property with or without indexation that was purchased some 16 years back and plan to sell in coming months after August 2015 ? Your article was very informative but at the end I am a bit confused . For my case, I calculated and the amount was around 4 lakhs without indexation and around 8.5 Lakhs with indexation. At some point in the above article, it is mentioned mentioned “For some asset classes where you have the choice of using Indexation or not Such as: Mutual Funds(Equity, Debt), Real Estate , Shares ,Gold, Fixed Maturity Plan(FMP).” But after few lines, it is also mentioned “For long-term gains on property, gold etc the tax rate is 20% with indexation of cost.” So, I am confused if I have choice to calculate with or without Indexation for my Real Estate property . Thanks

    Reply
    • bemoneyaware on August 1, 2015 at 4:56 AM

      For long-term gains on property, gold etc the tax rate is 20% with indexation of cost.

      Ok we can see where the confusion is.
      Choosing to go for indexation was only for Debt Mutual Funds and FMP. Have corrected it.

      For property it was always 20% with indexation.

      Reply
31. Amit on July 26, 2015 at 1:53 PM

    Hello,
    Thank you very much for this article. I have been trying to understand indexation and its calculations for a few years but could never understand it and hence used to always declare my Debt mutual fund investments at 10% tax without indexations since i always thought it to be complicated.
    To my surprise after reading this article, I finally understood the meaning and also found that the gain on my mutual funds after indexation is actually a loss and hence i do not have to pay any taxes on them. Thank you very much for the detailed article and the calculation.

    Reply
    • bemoneyaware on July 29, 2015 at 9:05 AM

      Thanks for comment. Appreciate it.

      Reply
32. Gargi on July 21, 2015 at 10:37 PM

    Hi Kriti,
    I purchased
    100 units on 1 April 2012 @ 10/-
    100 units on 1 April 2013 @ 20/-

    I sold
    200 units on 30 April 2014 @ 30/-

    Now in this scenario, I will be filing the Tax Returns in Assessment Year 2015-2016.
    Now, Since the Rule changed on July10,2014 , So Will the Capital Gain be considered as Long Term Capital Gain or Short Term Capital Gain?
    Will I get the option to have 10% without Indexation since the shares were sold before July10,2014??

    Reply
    • bemoneyaware on July 22, 2015 at 3:38 AM

      Sir rules have not changed for equity or shares.

      Shares in a company or any other security listed in a recognised stock exchange in India or a unit of a Unit Trust of India or a unit of a mutual fund specified under section 10(23D) Held for more than 12 months are still long term capital gains.
      And Long term capital gains are exempt from tax so you have to file them in Exempt Schedule as explained in our article Filling ITR-1 : Bank Details, Exempt Income, TDS Details

      Reply
      • Gargi on July 25, 2015 at 6:34 PM

        Hi,
        I have Long Term Capital Gain and Dividend Income from ESPP ( Employee Stock Purchase Plan) from a US based company.
        While filing ITR-2 in what section of Schedule CG should I mention the details of Capital Gain to get the LTCG without Indexation ( 10% tax) ? I am not able to find that section.

        Reply
        • bemoneyaware on July 29, 2015 at 9:17 AM

          Our article Employee Stock Purchase Plan or ESPP explains in detail
          it is Long term gain. Income tax would be at rate of 20% + education cess with indexation benefit.

          See long term gain and income tax computation method below:

          Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
          Sale Year = B, Selling price = Q, CII for sale year = Y
          Indexed Purchase price = P x (Y/X) = R
          Long term capital gain = Q – R = S
          Income tax on capital gain = S x 20%

          In case its not long term gain but a short term gain, whole gains (selling price – buying price) would be taxable as per your tax slab rates.

          You will have to fill these details in ‘CG-OS’ sheet in ITR-2 excel file. ‘Full value of consideration’ would have selling price. ‘Cost of acquisition’ would have purchase cost. If any additional amount was spent on transfer/selling like brokerage etc, that can be reduced under ‘Expenditure on transfer’ field.

          Please note that in case this is a long term gain, you can save income tax by investing into capital gain bonds u/s 54EC or into residential house property u/s 54F.

          Reply
          • Bhargav, S on August 8, 2015 at 8:45 AM

            In this example, If P and Q are in US $.
            DO i use Rs conversion rate of year A for P and rate of year B for Q.
            Or should i use rate of conversion of date of sale for both P and Q.

            Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
            Sale Year = B, Selling price = Q, CII for sale year = Y
            Indexed Purchase price = P x (Y/X) = R
            Long term capital gain = Q – R = S
            Income tax on capital gain = S x 20%

        • bemoneyaware on July 29, 2015 at 9:18 AM

          Did you get any document from your US broker ?

          Reply
33. Bhuvan Kumar on July 19, 2015 at 4:28 PM

    We purchased a property in the year 1966 for Rs. 6650 (six thousand six hundred and fifty only)and today we are about to sell it for Rs. 90,00,000 (ninety Lac only) how will the capital gains be calculated in this case.

    Reply
    • Kirti on July 19, 2015 at 4:45 PM

      If the property has been acquired prior to 1 April 1981, the acquisition cost will be the cost incurred by the original owner or the fair market value of the property as on 1 April 1981, whichever is higher,
      .How to find out the fair market value as on 1.4.1981
      well in that case the circle rate declared by local municipal authorites of that area where that land belongs would suffice or the recent sale of any property in that region with in that given period of time would help in assessing the market value of that property
      If Municipal authorities are not in a position to give circle rate as on 1.4.1981 Then You shall need to hire a property valuer to do the job.

      Reply
      • ABCDas on July 29, 2015 at 6:10 AM

        Under pressure from my co-owners I sold my 17% share in ancestral commercial property. To save on LTCG why can’t I again buy a commercial property. I understand only one residential property can be bought that too if I don’t own another. can I wait to invest in any REIT which is likely in this financial year. I have already deposited in bank FD but not under sec 54. Please guide me

        Reply
34. Sadanand V Kulkarni on July 15, 2015 at 12:39 PM

    1. I would like to whether Cost Inflation Index for FY 15-16 has been declared. If not, when it is likely to be declared?
    2. If a property is sold in FY 15-16, then how the capital gain tax will be calculated as the CII is not declared.

    Reply
    • ABCDas on July 29, 2015 at 5:55 AM

      2 or 3 days back its published as 1081

      Reply
      • bemoneyaware on July 29, 2015 at 9:22 AM

        Thanks Sir. Have updated the article. Working on the calculator

        Reply
35. Ajay on April 25, 2015 at 4:49 PM

    hi,
    Is the option for paying 10% tax on LTCG from property without indextation still allowed for FY 2015-16.

    Reply
    • Kirti on April 27, 2015 at 6:56 AM

      Ajay,
      Short ans: Long Term Capital Gains (for other than equity oriented) will be taxed at a flat rate of 20% with indexation. 10% tax was not on property but for debt Mutual Funds or FMP etc.

      Long answer:
      Before July 10 2014,
      For Long term Capital Gains for debt mutual fund units, the tax rate are: Either 10% without Indexation OR 20% with Indexation. Holding period is more than 12 months.
      For long-term gains on property, gold etc the tax rate is 20% with indexation of cost.
      Long term capital gains from equities are not taxed if shares are sold through recognized stock exchange and Securities Transaction Tax, or STT, is paid on the sale.

      After July 10 2014,
      Minimum holding period of units (for other than equity oriented) has been increased from 12 months to 36 months.
      Long Term Capital Gains (for other than equity oriented) will be taxed at a flat rate of 20% with indexation

      Reply
      • Gargi on July 21, 2015 at 10:37 PM

        Hi Kriti,
        I purchased
        100 units on 1 April 2012 @ 10/-
        100 units on 1 April 2013 @ 20/-

        I sold
        200 units on 30 April 2014 @ 30/-

        Now in this scenario, I will be filing the Tax Returns in Assessment Year 2015-2016.
        Now, Since the Rule changed on July10,2014 , So Will the Capital Gain be considered as Long Term Capital Gain or Short Term Capital Gain?
        Will I get the option to have 10% without Indexation since the shares were sold before July10,2014??

        Reply
36. SRS on April 20, 2015 at 5:27 PM

    IS THERE POSSIBILITY REINVEST THE LTCG EARNED OUT OF SALE DEAL OF LAND INTO NEW PURCHASE OF APPARTMENT., WITH IN 3 MONTHS OF THE SALE LAND – ENTER INTO AGRREMENT FOR APPRTMENT WHICH WILL READY FOR POCESSION IN THREE YEARS LATTER.

    OTHER POINT WHTHER DAUGHTER/HUSBAND / SON-IN-LAW CAN JOIN AS CO-INVESTER WITH THE MAIN INVESTOR WHO HAS PALN TO BY AN APPARTMENT.

    JUST FOR THE SAKE REGISTRATIONS THE NAMES OF THE WIFE INSERTED INTO OR INCLDED WITH THE 1ST HOLDER WHILE PURCHASING THE FIRST APPARTMENT JUST AS JOINT SECOND HOLDER BUT THEY HAD NOT PUT ANY MONEY ON IT, ARE THEY BE CONSIDERED TO BE PERSON HAVING ALREADY HOUSE MORE THAN ONE ARE SO., FOR LTCG CONSIDERTIONS UNDER RULE 54F…

    LAND SALE DEED FOR RS. 63 LACS, WHERE AS APPARTMENT COST COMES 108 LACS.
    AMT IN EXCESS OF 63 LACS IS OUT SAVINGS, EANRED INCOME AND THRU ANY LAONS.

    IS THERE ANY TAX LIABILITY ON THIS IF SO TO WHAT EXTENT, HOW TO SAVE THIS TAX LEGALLY

    Reply
37. ARVIND PATEL on April 19, 2015 at 9:23 AM

    1DOES SWITCH OUT IN TO OTHER SCHEMME OF SAME FUND WITHIN 1 YR.GET SHORT TERM GAIN? AND LONG TERM GAIN AFTER 1 YEAR?

    Reply
    • Kirti on April 19, 2015 at 10:21 PM

      Moving either the whole or part of the investment from one mutual fund scheme to another mutual fund scheme within the fund family is called as Switching of Mutual Funds. For example moving some or all your units from HDFC Top 200 to HDFC Balanced Fund would be considered as switching. A switch from one fund (source) to another fund (target) is actually a combination of two transactions:

      Redemption of units in the source or the scheme from where it is switched out
      Fresh purchase of units in the target or the scheme into which it is being switched
      Thus one will be liable for any applicable entry load or exit load. For this option some fund may levy a switching fee.

      Yes there are tax repercussions while switching from one mutual fund scheme to another depending on whether switch is from Equity Fund to Debt Fund or from Debt Fund to Equity Fund.

      Switching from Equity Fund to Debt Fund

      Appropriate Securities Transaction Tax(STT) is levied at the time of the switch on the Equity Fund investment. (STT is deducted at the time of we redeeming the equity fun so what we receive is the amount NET of STT.)
      If the equity fund investment is held for less than a year, short term capital gains would be applicable.
      If the equity fund investment is held for more than a year, it qualifies as long term capital gains. As securities transaction tax(STT), long term capital gains on the equity asset class is waived off over the mutual fund units.
      Switching from Debt Fund to Equity Fund

      No securities transaction tax is payable at the time of redemption of the debt fund units.
      Meaning of Short term capital gains(STCG) and long term capital gains(LTCG) is the same i.e holding period of less than one year is short term gain while holding period of more than one year is long term gain.
      STCG on a debt instrument gets added directly to your overall taxable income in the financial year and LTCG is currently taxed at 10% with indexation plus applicable surcharge.
      Short term capital gains are not deducted at source (like TDS on our salary). We need to show the transaction details, the actual STCG made, as a part of Income Tax Returns and pay appropriate tax. (One can deduct STT from Short term gain earned)

      For example, you invested Rs 1,00,000 in equity fund on June 1, 2013 and when you have 20% gain you redeem or transfer the Rs 1,20,000. The securities transaction tax is 0.125% on the transacted amount; which works out to 0.125%*120000, i.e. Rs.150.

      If the investment is held for less than a year say you sell on Oct 2013. The tax liability would be: 150 (STT = .125% of 20,000 ) + 3000 (STCG = 15% of 20,000)+ 90(Surcharge plus Education Cess : 3% of 15% of 20,000 ) which is: Rs 3240.

      If the investment is held for more than a year say you switch on 10-Aug-2014. As you have held equity investment for one year, it is long term capital gains. All that needs to be paid is the STT, which is Rs. 150 (STT = .125% of 20,000 )

      When you file the IT Returns in July 2014 (for the financial year 1 April 2013 to 31 March 2014) , for redemption from equity fund in Oct 2013 you will have to shell out an additional Rs 3090 as tax (because that STT of Rs. 150 was already deducted at the time of redemption).

      Reply
      • jiten on April 23, 2015 at 12:29 PM

        Hi Kirti
        Two queries
        1. when we switch from a ” dividend option’ investment into the growth option of the same fund and scheme, from which date is the angle of taxation accounted for ?
        2. From FY 15-16 onwards, for LTCG or > 36 Months in FMP”s, is 20% with idnexation the ONLY option ? or 10% with indexation is there too.
        Thanks
        Jiten

        Reply
        • Kirti on April 24, 2015 at 4:50 AM

          Sir,
          As the Dividend and Growth options are treated as two different schemes, with different NAVs, a change from Dividend to Growth would be a Switch i.e. redemption from one scheme ex Dividend Payout and a purchase into the other ex Growth. For this change one needs to submit a switch request form.
          Taxation for scheme you switched from ex: dividend option would consider time period from date you invested in Dividend option and date you switched.
          Taxation for scheme you switched to ex:Growth option purchase price would be date of switching.
          Our article Switching of Mutual Funds covers switching in detail.
          From 11 Jul 2014, The Long Term Capital Gain tax rate on non-equity funds is 20% (with Indexation benefit). 10% indexation benefit is not available.
          So if you sell your non equity funds which include FMS before 36 months, the gains will be added to the income and taxed as per your tax slab. This means that for corporates, the tax rate will be 30% plus surcharge and cess. If you sell after 36 months, you will have to pay tax at the rate of 20% after indexation.

          Reply
38. rao on March 28, 2015 at 4:58 PM

    u have mentioned in a case worked out in the yr 2011-12 that capital gain tax is 20% with indexation and 10%
    without indexation.Does the % holds good for yr 2014-15 or is there any change?

    Reply
    • Kirti on March 29, 2015 at 10:53 AM

      Sir there has been change after July 10, 2014.
      From Jul 10,2014
      Minimum holding period of units (for other than equity oriented) has been increased from 12 months to 36 months.
      Long Term Capital Gains (for other than equity oriented) will be taxed at a flat rate of 20% with indexation, whereas earlier it was minimum of 10% (w/o indexation) and 20% (with indexation).

      From Oct 1 2014, From Dividend Distribution tax (for other than equity oriented) has to be calculated on Gross distributed income, whereas, earlier it was calculated on Net distributed income.

      Reply
39. Cassidy on April 6, 2012 at 5:20 PM

    Its 10% without Indexation and 20% with Indexation…there are atleast two places in the articles where u have written the opposite…
    Headings:
    a) Tax liability on capital gain with indexation and without indexation
    b) Calculation of Tax liability for Different Purchase Dates as in case of Stocks

    Reply
    • admin on April 6, 2012 at 7:09 PM

      Thanks Cassidy for pointing it out.Please accept our apologies. Correction done!

      Reply
40. Shirish on March 17, 2012 at 5:44 PM

    The article mentions that there is a CG tax on LTCG on listed shares and units of MF. This is not correct. Currently, the LTCG tax on shares and units of MF is exempt.
    Ragards,

    Reply
    • admin on March 17, 2012 at 6:19 PM

      Yes we had mentioned it wrongly. Thanks Shirish for pointing it out. Have updated the article.

      Reply
41. Paresh on March 16, 2012 at 3:23 PM

    Good Info..
    Little bit surprised as there was no mention of 54EC capital gain Bonds offered by companies like NHAI or REC…

    Reply
    • admin on March 16, 2012 at 5:38 PM

      Bang on Paresh. Yes we did not talk about 54EC capital gain as we wanted to do a full article on that. But you are right we should have atleast mention it. Shall do it at earliest.

      Reply
      • Paresh on March 16, 2012 at 7:14 PM

        would like to learn more about 54EC bonds….

        Reply
42. Ram on March 12, 2012 at 1:48 PM

    Nice article. Helped me understand indexation

    Reply
    • admin on March 13, 2012 at 3:37 AM

      Thanks a lot Ram. We are happy to know that our article helped you, comments like these makes blogging worthwhile!

      Reply

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