If you buy a property and sell it after three years at a profit, you would have to pay long term capital gains tax. Say for example you bought a property in 2003 for Rs 20 lakhs and have now sold it for Rs 40 lakhs in 2013, you are to pay a capital gains tax on the profit of Rs 20 lakhs. The current rate of long term capital gains is 20 per cent with indexation. Therefore, in the above example you do not have to pay 20% of Rs 20 lakhs profit, since you have to take into account indexation as well. What is capital gains with indexation? Since inflation has eaten into your profits, the government allows you indexation benefits, which is calculated based on the cost inflation index. The Cost inflation index is released every year sometime in the middle of the year. The table below shows you the cost inflation index. So, in the above example the Indexed Cost of Acquisition = (Actual cost of purchase) x (CII Of Year of Sale)/(CII of Year of Purchase). Therefore the indexed cost of acquisition in the above case would Rs 20 lakhs x 852/447 = Rs 38,12,080 Therefore you would pay capital gains as follows: Sale price - minus indexed cost of acquisition = Rs 40,00,000 - 38,12,080 = Rs 1,97,820 Therefore the capital gains would be 20 per cent of Rs 1,97,820 = Rs 39,564 Table with cost inflation index since 1981-82 Year Cost Inflation Index 1981-82 100 1982-83 109 1983-84 116 1984-85 133 1985-86 140 1986-87 150 1987-88 161 1988-89 172 1989-90 182 1990-91 199 1991-92 223 1992-93 244 1993-94 259 1994-95 281 1996-97 305 1997-98 331 1998-99 351 1999-2000 389 2000-2001 406 2001-2002 426 2002-2003 447 2003-2004 463 2004-2005 480 2005-2006 497 2006-2007 519 2007-2008 551 2008-2009 582 2009-2010 632 2010-2011 711 2011-2012 785 2012-2013 852
Posted on: Sat, 21 Sep 2013 09:03:56 +0000
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