ITR Filing for FY 2021-22: How to Calculate Capital Gains Tax on Sale of Property

how to calculate capital gain on sale of assetHemal Mehta, Partner, Deloitte India said, “Assets i.e. land and buildings qualify as ‘capital assets’ (except agricultural land which is not a capital asset), capital gains tax is levied at the time of transfer of such land and building. The nature of such capital gains may be classified as ‘long term’ if the asset is held by the seller for 24 months or more; or as ‘short term’ if held for less than 24 months Long-term capital gains are taxed at the rate of 20 per cent (increase by applicable surcharge and cess) whereas short-term capital gains are taxed at the normal tax rate of the assessees.

Hemal Mehta further stated that the capital gain is calculated by taking the transfer expense and the indexed cost of acquisition (‘COA’) less the full value of consideration (‘FVOC’). However, in case of land/building; Such FVOC should be the minimum stamp duty value (‘SDV’) of such property, however, up to 10 per cent of the safe harbor limit is allowed. In other words, if the SDV exceeds 110 per cent of the sales consideration, such SDV will be treated as FVOC. Capital gains taxpayers are also allowed an indexation of the cost incurred on the acquisition and improvement of the property.

Further, the buyer of the property has to deduct tax at the rate of 1 per cent of the total consideration on behalf of the seller, provided the consideration is higher 50 lakhs. Accordingly, if the payment is made in installments; Then TDS Deduction will also be made on every installment. Thus, the buyer is bound to comply with withholding tax. The seller can get credit of such TDS at the time of filing the income tax return.

Archit Gupta, Founder and CEO, Clear said, “If the taxpayer has sold the property within two years of its purchase or construction, then Short Term Capital Gains (STCG) will be taxed at the applicable slab rates. However, assume the property Long Term Capital Gains (LTCG) will be taxed at 20 per cent after completion of 24 months when it was sold.

On how to calculate capital gain on sale of assets, the expert listed the following formula:

– STCG = Final Selling Price – (Cost of Acquisition + Cost of Improvement or Change or Refurbishment + Cost of Selling).

– LTCG = Final Selling Price – (Indexed cost of acquisition + Indexed cost incurred for improvements or alterations or renovations + Cost to make sales).

Archit Gupta of Clear said, “However, these capital gains will be tax-free if the sale proceeds are invested in the purchase of any other residential property or in notified bonds of NHAI, REC, IRFC or in a capital gains account designated for such investment. Is.”

Here the listing cost would be: cost [Cost inflation index (CII) of year of sale CII of year of acquisition or 2001-02, whichever is later],

first article