Impact of budget: Long term capital gains on property

04 Aug, 2014

So we are all aware of the fact that if one was to buy a property and sell it after a certain period in time. In case the property is sold at a profit, there are some capital gains that arise of the investment.

For Eg,

You bought a property for Rs 20,00,000 in 1999
You sold the property for Rs 130,00,000 in March  2013
The Profit on the sale was Rs 110,00,000
In the sale of properties , there is a concept where the buying price of the value is adjusted until the time of sale

For Example:

Index for     FY 1998 – 1999: 351
Index for     FY 2013-2014 : 939
Indexed Cost of acquisition :Rs 20,00,000 X ( 939/351 )= Rs 53,50,000
Sale Price : Rs 130,00,000

Long Term Capital Gain on Sale:  Rs 76,50,000( approx) = ( Rs 130,00,000-53,50,000)
This amount has to be invested into Long Term Capital Gain Bonds to save on tax.


The current budget has given an important clarification w.r.t to 54 EC ( investment in LTCG Bonds )
Prior to this if an asset was sold after September of a Financial year, one could have invested Rs 1 crore u/s 54 EC by splitting the investments in two financial years.

It is now proposed that the investments in 54 EC in the FY in which the asset is sold and the subsequent FY is limited to 50 lacs only.

Which means Rs 50,00,000 can be invested in Capital Gain Bonds within 6 months from the date of sale and a tax of 20.6% has to be paid towards the balance ( Rs 76,50,000-50,00,000= Rs 26,50,000) = Rs 5,45,900

Dipika Kalra - a Business Management Graduate in Finance and an Associate Financial Planner with 6 years experience across the field of Personal Finance. Experienced trainer and orator has conducted several work shops at various corporates and colleges . With passion of connecting in people,  brings her great joy in making money more conversational and simple to understand.

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