Benefit of section 54F on LTCG

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?

Thanks – Subasu
Answer – 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.



Dear Ashal!

Thanks for the prompt response and detailed calculations.

One more modification would be introduced to this calculation because I did not furnish you with that info.

I had financed this purchase in 1988 with the help of Loans from BHEL and Cement Corporation of India. I have not preserved the interest records. The amount was borrowed in 1984, 1985 and 1986 and repaid completely in 1991.

As I do not know the interest quantum, I do not know what to do with that.

Any suggestions would be welcome.
Thanks once again.


Dear subasu, as the records of loans are not with u, also the applicable FYs r also date very back.

Hence I’m sorry to say that u can’t do anything now.



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