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LTCG
I have a property that I bought for ₹18 lakh in 2011. I am planning to sell it for ₹25 lakh this year. I need some help in calculating the capital gains. As per my understanding, the indexed cost of property is ₹30.17 lakh. As I am selling my property for ₹25 lakh and the indexed cost is ₹30.17 lakh, is it correct to assess that I won’t have to pay any tax as I have incurred a capital loss? If I sell my property for more than ₹30 lakh, will I have to pay long-term capital gains (LTCG) tax?
It is assumed that the property is a residential house property. Also, based on the details provided by you, it is assumed that the property was acquired in financial year (FY) 2010-11.
As the property was held for more than 24 months prior to sale, the same shall be considered as long-term capital asset, and the gains arising therefrom would be taxed as LTCG or long-term capital loss (LTCL) in your hands.
Capital gains or loss is calculated as the difference between the sale consideration ( ₹25 lakh) and the indexed cost of acquisition (ICOA). The ICOA would be calculated as cost of acquisition ( ₹18 lakh) multiplied by cost inflation index (CII) of year of purchase ( ₹167) multiplied by CII of year of sale ( ₹289). Accordingly, the ICOA in your case would be approximately ₹31.15 lakh.
Accordingly, in the instant case, there is a resultant loss of ₹6.15 lakh if the property is sold for ₹25 lakh and the value adopted for stamp duty purposes is within 105% of such sales consideration.
Hence, in this case, as there is an LTCL, you will not be required to pay taxes. The LTCL can be set off against other LTCG (if any) in the said FY. The unadjusted LTCL can be carried forward for eight FYs immediately succeeding FY2019-20 and can be set off only against LTCG arising in the future. You would also need to report this transaction in your India tax return, even if no tax is payable.
In case your sale consideration is higher than the ICOA, there shall be a resultant LTCG. The said LTCG would be subject to tax at 20% (plus applicable surcharge and education cess). Certain specified exemptions are available under the Act, towards reinvestment of such LTCG or sales consideration in specified assets, which may be separately evaluated. If tax is payable, you will need to deposit the taxes on LTCG as per specified dates of payment of advance tax.
