Capital Gains

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CMA Raveendranath (Querist)
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03 February 2011 I have puchased a flat in 2005 for Rs42 lakhs and Rs20 lakhs was financed by Bank.I got the property registered for Rs.28lakhs in 2006. I have purchased one more flat in 2008 (registered in 2009.) Now, I am willing to sell the flat for Rs55 lakhs and would like to clear the loan of Rs 20 lakhs taken in 2005 and would like to use the remaining balance of sale proceed to clear the loan of new flat which I purchased in 2008.

My question, Do I need to pay Capital Gain Tax on the sale made? If yes, then what amount do I need to pay.

regards,
Kaushik

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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03 February 2011 Sale value = Rs. 55lakhs.
Cost = Rs. 28 lakhs.
Indexed Cost = Rs.28 X 711 /480 = Rs.41.50 lakhs.
Capital Gains =Rs.55/- lakhs minus Rs. 41.50 lakhs = Rs.13.50 lakhs.
Presuming that you have taxable income other than from capital gains, you have to pay income tax on capital gains @ 20 %.

N.B:- You will not get income tax relief for the repayment of loan since the lien on the property is created by you.

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CMA Raveendranath

CMA Raveendranath (Querist)
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03 February 2011 Thanks Chakrapani for your reply. One more small doubt, In the Sale value of the asset I can reduce the cost of improvements made to the assets from 2005 to present day, right? What all proof I need to furnish for doing so?

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