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.
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.
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.
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