How to calculate capital gain tax when selling a property?

Question

I have sold a property in 2004 which I bought for Rs 10,000 in 1955.
What is the price of the property on April 1, 1981 and what should it be in April 2004 for purposes of calculation of capital gain

Answer 1

You are suppose to esquire the fair value for your property as on 1-4-81. Also you have not given the sale value as on 2004. The answers given by "Nuture_lu" and "Curious" are good.

Any way the calculation will be like this:

Say the fair market value of a property as on 1-4-1981 is Rs.1 lakh.

Sale value of the said property on 1-4-2004 say Rs.5 lakhs.

Inflation Index on 81-82= 100, on 2004-05= 480

Indexation value: 1,00,000 x 480 / 100 = 4,80,000

That is the value of Rs.1 lakh on 1.4.81 became 4.8 lakhs on 1.4.04.

Long term gain= 5 lakhs- 4.8 lakhs= Rs.20,000

Tax on Rs.20,000@20%= Rs.4,000

This is the model calculation. OK ??

Answer 2

Amount of Capital Gains is the difference between the selling price/Transfer price and the Cost of Acquisition(COA).
Cost of acquisition is the actual cost incurred for obtaining the property or if the property was purchased berfore before 1-4-1981 (as in ur case) the Fair market value of the property as on 1/4/81 can be treated as the COA. If you are unable to find out the price for 1/4/81 price of a similar property as on 1/4/81 will also do as a reference benchmark or you can seek the help of a professional valuer.

Selling/Transfer price is the actual amount for which you sold the property in 2004.

Also as the gains is long term capital gains you are eligible for the benefit of indexation. The benefit of indexation is given so that the assesse is compensated for the inflation that has happened over the years. Thus due to this there is a notional increase in ur COA and you are benefitted by decrease in the amount of capital gains and thus reduction in tax liabilty.

The amount of difference between COA and SP/TP is the cap. gain liable to be taxed at 20% flat tax + surcharge + edu. cess.

************** 1 important pnt tht most others hv missed/are expected to miss is:
Also since the capital gains have accrued to you in 2004 and i assume that since you hvn't still paid the tax on this transaction yet, u will also have to pay interest.
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Since you have not given the exact selling date and other details it is impossible to help you further because your assesment year will also change depending upon whether you have sold the property before 31st March,04 or afterwards. You may either contact me at [e-mail] or you can alternatively take the help of a professional like a CA or a tax consultant.

Answer 3

For ay property purchased before 1981 you will have to check its fair market value as on 1st April 1981 and than calculate its value for Capital gain purpose. You have not given the fair market value nor have you given the selling price of the property so calculating cap gain tax is not possible.

Get hold of any CA or tax consultant in your city or at Income tax dept help desk and your queery will be answered.

Answer 4

i think u should ask tax department...coz ur Q is not clear...