I am 78. I sold a shop I purchased in 1999 for ₹2.40 Lakh and spent ₹1 lakh on better looks and convenience in 1998. I am planning to sell it for ₹18 lakh in August 2024. Can you advise me how much the capital gain will be?How can I save the tax?
As the property has been held for more than two years, its profits on sale will be treated as long-term capital gains. Moreover, as the property was bought before 1st April 2001, you can take the fair market value of 1st April 2001 as your cost. You can obtain the same by obtaining a valuation report from a registered valuer. The valuation, as derived by the valuer, cannot be higher than the circle/stamp duty rate.
Indexation benefit withdrawn; capital gains taxable
Since the indexation benefit has been withdrawn for all transactions done on or after 23 July 2024, the sale price, as reduced by the fair market value on 1 April 2001, will be taxable long-term capital gain. Since I do not have the details of the market value on 1 April 2001, I cannot help you calculate the capital gains.
To save tax, you have two options. Either you invest the capital gains to purchase a house within two years or get a house constructed within three years, either yourself or through booking with a builder. The money not invested before 31 July 2025 has to be deposited in a capital gains account.
Under the second option, you have to invest the long-term capital gains, i.e. the difference between the sale price and fair market value on 1st April 2001, in the capital gains bonds of specified financial institutions within six months from the date of sale of the shop.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
