How is long-term capital gains tax on sale of property calculated


I bought a house in 2002 for Rs 15 lakh and am about to sell it now for Rs 60 lakh. How much tax will I have to pay?
Archit Gupta CEO, ClearTax 
replies: As you have held the property for more than two years, gain from its sale will be long-term. You are allowed to index the cost of acquisition and the cost of any improvements made to it over the years. Indexation is done by multiplying the property’s cost by the Cost Inflation Index (CII) of the year in which it is sold and dividing it by the CII of the year in which it was purchased.

The CII of 2019-20 has yet not been announced. To arrive at the capital gain, you will have to reduce the indexed cost of acquisition from the selling price. The capital gain will be taxed at 20.8%. You can save tax by investing the sale amount in a new house or purchasing capital gain bonds.

I have received Rs 25 lakh from the sale of an ancestral property. Long-term capital gain (LTCG) works out to be Rs 22 lakh. Can I save LTCG tax by constructing one more floor on my current house?
Ashok Shah Partner, N.A. Shah Associates
 replies: According to Section 54 of the Income Tax Act, you can save LTCG from the sale of a house by investing the capital gain in constructing a house within three years from the date of sale. Constructing an additional floor on your current house can be treated as construction of a house and will qualify for exemption, if the additional floor is deemed fit to be used as an independent house. There are number of judicial decisions that confirm this position.

I am a former army officer and earn a defence pension. I am currently working in a public sector bank. Can I claim the standard deduction of Rs 40,000 twice? For income from salary and pension?
Amit Maheshwari, Partner, Ashok Maheshwary and Associates
 replies: For salaried employees, the standard deduction of Rs 40,000 is allowed from the total income that falls under the head salaries, and not for salary income from each employer individually. So, this deduction cannot be claimed twice.


Author: Loki