Calculation for Long Term Capital Gain for purchase as well as improvement of the property in subsequent years.

Dear Mr. Ashal!

Please clarify the following.

Cost of Purchase 2.42 lakhs (1988)


Cost of improvements 1.00 lakh (approx) 1991.


Cost of improvements 0.16 lakhs (1996).

Sold in 2009 2010 for Rs. 82 lakhs.

Invested in REC/NHAI Bonds 50 lakhs.

Bought another residential property Rs. 32 lakhs.

Taxable long term gains is NIL. Am I right?

-Subasu

Ans.
Dear subasu, b4 I comment here I assume the following –
Purchase year is FY 1988-89.
1st improvement year is FY 1991-92.
2nd improvement year is FY 1996-97.
Year of sell is AY 2009-2010 or FY 2008-2009.
Here goes the LTCG calculation.
A. Purchase price = 2.42L Rs.
B. Cost Inflation index (CII) of FY 1988-89 = 161
C. CII for FY 2008-2009 = 582
D. Indexed purchase price = A*C/B = 2.42*582/161 = 8.75L Rs.
E. 1st improvement price = 1.0L Rs.
F. 1st improvement FY CII = 199
G. Indexed 1st improvement price = E*C/F = 2.92L Rs.
H. 2nd improvement price = .16L Rs.
I. 2nd improvement CII = 305
J. Indexed 2nd improvement price = H*C/I = 0.30L Rs.
K. Total Indexed purchase & improvement price = D + G + J = 11.97L Rs.
L. Sell price = 82L Rs.
As more than 3 years r completed for purchase as well as each of improvement also, hence all r eligible for consideration of LTCG.
M. Hence LTCG = L – K = 70.03L Rs.
N. amount invested in LTCG Tax saving bonds = 50L
O. amount invested in Res. property = 32L Rs.
P. Total invested amount = N + O = 82L Rs.
As the amount in P above is more than M above, so no LTCG Tax liability is there.
Yes u r right.
Thanks
Ashal
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