Under Section 54F, there is a 100% deduction on the capital gains tax if the entire amount received from selling land is used for purchasing or constructing a house. Some of the most popular ones are as follows. Yes, under the IT Act, there are a few ways to help landowners reduce their capital gains tax liability. 1,74,000 as tax on LTCG.Īre There Deductions Available for Reducing Capital Gains Tax? The capital gains tax on sale of land will be Rs. In this situation, the tax will be 20% of 8,70,000. Therefore, the indexed cost of purchase is Rs. Indexed cost of purchase = Cost inflation index x Purchase price. 30 Lakhs in the year 2015.ĬII in the year 2005 was 480, and in the year 2015, it was 1024. Thus, once the purchase price is increased, it gets deducted from the sale price while calculating long-term capital gains. It enables the person to set the cost of the property against inflation. Indexation allows the seller to inflate the purchase cost of the property based on the cost inflation index. CII is a crucial factor in determining the indexed cost of acquisition and improvement.Ĭost Inflation Index = Index for the financial year of the transfer/ Index for the financial year of the acquisition The government declares this index every year. This helps in reducing your capital gains as the acquisition or improvement cost gets higher.Īn important factor that you need to consider while calculating LTCG is the cost inflation index (CII). In LTCG, you can deduct the indexed acquisition and improvement cost from the sale price. The income is taxed based on the slab rates. The profit from the sale of land becomes a part of the total income. Tax will be levied based on the tax slab he belongs to.Ĭalculating tax on STCG is easier. Mr.Ansari purchased land in the year 2015. If you are selling the land within 36 months of purchasing it, deduct the acquisition cost, improvement cost (if any), and sale-related expenses from the sale price. Here is how you can calculate the capital gains from selling a land. How to Calculate Capital Gains on Sale of Land? In the case of STCG, the profits generated in the process of selling land is included in the taxable income of the owner and he/she has to pay taxes depending on the income tax slab they fall in for that particular financial year. Capital gains tax is of two types- Short-Term Capital Gains (STCG) for a property held for less than 36 months and Long-Term Capital Gains (LTCG) for above 36 months. When you sell a property, be it a home or land, you have to pay capital gains tax on the same. Here is a detailed explanation of land tax on capital gains and how to calculate it. In the same manner, you also have to pay taxes on your capital gains.Īs land is a capital asset too, the capital gains from selling it attracts tax. As a taxpayer, you have to pay taxes on the income you earn in a financial year.
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