Income tax on Long Term Capital Gains LTCG on sale of a house calculation

Income tax advice on Income tax and calculation of capital gain on house property an shares


Que: What is Short Term Capital Gain (STCG) on shares?

Ans: If shares or equity MFs are held for less than 12 months before selling, the gain arising is classified as Short Term Capital Gain.
[The only condition here is that the shares / equities should be sold on a recognized stock exchange (for example, BSE or NSE), and a securities transaction tax (STT) should be paid on it.

If the sale of shares is off-market (that is, if the sale is not on a stock exchange), the gain would be classified like that for other capital assets. More on this in later sections.]

In this case, the short term capital gain is taxed at 15% of the gain.

Que: What is Long Term Capital Gain (LTCG) on shares?

Ans: If shares or equity MFs are held for more than 12 months before selling, the gain arising is classified as Long Term Capital Gain.
In the case of long term capital gain arising out of the sale of shares or equity mutual funds, there is no income tax.
The long term capital gain in this case is tax free.

Que: How is Short Term Capital Gain (STCG) on all other Capital Assets ( other than shares ) computed? 

Ans: If the capital asset is held for less than 36 months before selling, the gain arising from it is classified as Short Term Capital Gain.
This short term capital gain is clubbed with your income for the year, and is taxed at a rate as per the applicable tax slabs / brackets.

Que: What is date of acquisition for long term capital gain – is it Date of possession,/ Date of registration?

I have booked a flat in appartment, which was under construction in Noida  from builder in May, 2004. The flat is registered on my name in Feb 2008. Builder handover (possession) the flat to me in Feb 2007.
Now I want to sell that flat in Noida, and purchase another flat in Gurgaon using the gains from Noida flat.
Please tell me if it is considered as Long term capital gain or short term capital gain.

Ans: Cost of acquisition is taken from date of possession.

Date of taking possessions relevant for computing cost of acquisition – Date of taking over possession of property purchased, and not the date of registration of sale in favour of the assessee, is relevant for computing the prescribed time-limit – CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397 (AP).

Punjab and High Court in the case of CIT v. VedParkash Sons (HUF) [1994] 207 ITR 148.

The facts of the case are that the assessee entered into agreement for purchase of a flat in New Delhi on 29-5-1970. Pursuant to the agreement he was put in possession of the flat on the same day. According to the stipulation, the assessee was to pay the amount in instalments and the last instalment was paid on 10-2-1973.

The assessee sold the property on 10-2-1973 and claimed that gains were long-term capital gains.

The Honble Court pointed out that on perusal of section 2(42A) of the Act, it is clear that ;short-term capital asset; means a capital asset held by an assessee or not more than 24 months (now 36 months) immediately preceding date of its transfer. Thus, a person can be said to be holding a property as owner, lessee, mortgagee or on account of part performance of agreement etc. and in this connection, the dates of payment of instalments are not material. The assessee was put in possession of the flat on 29-5-1970 and, therefore, he held the property for more than 24 months immediately preceding the date of its transfer Author’s note previously 24 months was holding period fixed for terming a capital asset as long term. Not is it is 36 months

Therefore , if you can count the period of holding from the date of booking the flat and as per that sale of flat will bring long term capital gains .

Que: I am selling my 9 year old flat and booked a bigger flat but possession is after 20 months. After selling old flat in one month, I will get payment in one stroke. How can I keep this money – in Bank or shall I give it to a new builder and ask for benefit?

Ans: When you sale you old house , you can save long term capital gain, by purchasing home one year before or two year after the sale.

  1. Please ensure that you get possession before 24 months, in case you dont get possession within in 24 months , then you will loose tax benefit.
  2. Keep the money with you up to the date of filing the return and thereafter, must keep in separate bank account known as capital gain accounts.

Que: If the EMI is being paid by Husband  ‘one of the co-borrowers’ but the loan is jointly taken by both the co-borrowers ( both husband and wife) on purchase of a house property, will this still entitle both of them to get benefit under Section 80C and 24(b)?

Ans: No, Only the person paying the loan installment is entitled to get benefit.

You should avoid doing such transaction. Because section 64 ( clubbing of income),  will be invoked.

Que: What is cost inflation Index for previous year?

Ans: Cost inflation Index for previous years can be viewed here

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