08 March 2011
one of friend has a property which was bought in 1970 for 1,00,000/- and he wants to sell it for 3crores so how much income tax does he need to pay?
08 March 2011
Find out the fair market value of the property as on 1 April 1981. In case it exceeds Rs 100,000/- (the cost of property), take that value as the cost of acquisition (COA). Thereafter index such cost based on the cost inflation index (CII) of the year in which your friend transfers the property. The CII for 2010-11 is 711. Your friend would also need to find out the cost of improvement (COI) incurred on or after 1 April 1981, if any, and thereafter index it. The calculation mechanism is detailed in a simplified manner below for your reference:
Sales Consideration of the property XXX
Less: Indexed COA (COA X Index of the year of transfer/ 100) XXX Indexed COI (COI X Index of the year of transfer/ Index of the year in which such improvement took place) XXX Expenses incurred wholly and exclusively in connection with sale of property XXX
Capital Gains XXX
Your friend can invest this capital gain in specified manner to save tax thereon, depending upon the nature of property sold by him.
CAclubindia
