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Ltcg from sale of residential house

Vaibhav K (Self Employed) (39 Points)

06 March 2012

QUERY:

Mr. X had bought a Residential House in the Year 1992-1993 for Rs.2,00,000 on Loan.(Cost Inflation Index 199).

For this loan, EMI & Interest was paid regularly.

He Sold the Property in the Month of January, 2012. (Year 2011-2012) for Rs.50,00,000. (Cost Inflation Index 785).

So, his Indexed Cost of Acquisition is : (785/199) * 2,00,000 = 7,88,945.

His LTCG will be : 50,00,000-7,88,945 = 45,11,055

He repays the Loan Amount of Rs.2,00,000 from this Capital Gain and Closes the Loan A/C.

He also purchsed new Residential Property in February,2012 for Rs.65,00,000.

The Query is: What is the Actual Capital Gain? Rs.45,11,055 or (45,11,055-2,00,000).

What will be the Exemption under Section 54? Rs.45,11,055 or Rs.(45,11,055-2,00,000=43,11,055)?

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6 Replies

CA SACHIN VIJ (Chartered Accountant) (112 Points)
Replied 07 March 2012

Capital gain has nothing to do with loan repayment...

Capital Gain is Rs.4511055 so exemption u/s 54 would be for Rs.4511055/-.

54(1) Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

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Anooj (Chartered Accountant) (2130 Points)
Replied 07 March 2012

Originally posted by : CA SACHIN VIJ
	Capital gain has nothing to do with loan repayment... Capital Gain is Rs.4511055 so exemption u/s 54 would be for Rs.4511055/-. 54(1) Subject to the provisions of sub-section (2), where in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

Mihir Doshi (B.Com, CA, CS, LLB) (2187 Points)
Replied 07 March 2012

LTCG - 45,11,055/- and entire amount is exempted because you have bought another residential property for more than LTCG amount i.e. 65,00,000/-

Thanks

Mihir Doshi

Mihir Doshi (B.Com, CA, CS, LLB) (2187 Points)
Replied 07 March 2012

LTCG - 45,11,055/- and entire amount is exempted because you have bought another residential property for more than LTCG amount i.e. 65,00,000/-

Thanks

Mihir Doshi

Ankit (CA Final) (75 Points)
Replied 07 March 2012

i think my senior frnz had made a small calculation mistake as 50,00,000-7,88,945 = 42,11,055 , so LTCG would b Rs. 42,11,055 and exemption u/s 54 would be the same.