capital gains

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sanjeev (Querist)
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14 January 2009 I have purchased a plot of land in the year 1996 for an amount of Rs. 5,00,000/- and spent Rs. 1,00,000/- on stamp duty. Now I intend to sell the same plot of land for Rs. 40,00,000/-.
My query is that how much I have to pay as capital gain tax.
what will the exact capital gain on which i have to pay tax or how much i have to invest in any type of bond to save capital gain tax.

CA.ViVeK M ACA

CA.ViVeK M ACA (Expert)
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15 January 2009 Sales consideration 4000000
Less expense for transfer NIL
Net consideration 4000000

Less indexed cost of Acquisition
600000/281*551 1176512

Capital gain 2823488

Less excemption u/s 54 2823488

TAx Nil

Note excemption u/s 54 is available only to the extent of investment in the new house property or capital gain whichever is lower....

sanjeev

sanjeev (Querist)
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16 January 2009 I have purchased a plot of land (not house property) in the year 1996 for an amount of Rs. 5,00,000/- and spent Rs. 1,00,000/- on stamp duty. Now I intend to sell the same plot of land for Rs. 40,00,000/-.
My query is that how much I have to pay as capital gain tax.
what will the exact capital gain on which i have to pay tax or how much i have to invest in any type of bond to save capital gain tax.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 To calculate the capital gain on the sale of your plot of land and understand the tax implications, we need to follow these steps:

### Step-by-Step Calculation:

1. **Calculate Cost of Acquisition:**
- Purchase Price of the land: Rs. 5,00,000/-
- Stamp Duty paid: Rs. 1,00,000/-
- Total Cost of Acquisition = Rs. 6,00,000/-

2. **Calculate Indexed Cost of Acquisition:**
- The cost inflation index (CII) for the year of purchase (1996-97) is 305.
- The CII for the year of sale (assuming FY 2023-24) is 1081.

Indexed Cost of Acquisition = Cost of Acquisition × (CII of the year of sale / CII of the year of purchase)

Indexed Cost of Acquisition = Rs. 21,25,245/-

So, the indexed cost of acquisition is Rs. 21,25,245/-.

3. **Calculate Capital Gain:**
- Capital Gain = Selling Price - Indexed Cost of Acquisition

Capital Gain = Rs. 18,74,755/-

Therefore, your capital gain from the sale of the plot of land is Rs. 18,74,755/-.

4. **Tax on Capital Gain:**
- Long-term capital gains tax on sale of land is currently 20% with indexation benefits.
- The tax liability will be 20% of Rs. 18,74,755, which amounts to Rs. 3,74,951/-

5. **Investment to Save Tax (Section 54EC):**
- To save tax on long-term capital gains, you can invest in specified bonds under Section 54EC of the Income Tax Act.
- These bonds are issued by NHAI or REC and have a lock-in period of 5 years.
- You can invest up to Rs. 50 lakh in these bonds within 6 months from the date of sale to claim exemption from capital gains tax.

In your case, to fully save the tax of Rs. 3,74,951/-, you would need to invest in these specified bonds up to the maximum exemption limit allowed under Section 54EC.

### Conclusion:
- The exact amount of capital gains tax you will pay on the sale of your plot of land is Rs. 3,74,951/-.
- To save this tax, you can invest in specified bonds under Section 54EC.
- Ensure you complete the investment within 6 months from the date of sale to avail the tax exemption.

It's advisable to consult with a tax advisor or chartered accountant for precise calculations and to ensure compliance with all tax regulations.