How to Calculate Capital Gain on Property Sold in FY2023-24, Bought Before 2000
Step-by-Step Guide to Calculate Capital Gain
- Determine the Sale Price (SP):
The total amount you received from the sale of the property.
- Determine the Cost of Acquisition (COA):
Since the property was bought before 2000, you need to find the fair market value (FMV) of the property as of April 1, 2001, because properties acquired before this date are valued at their FMV as of April 1, 2001, or the actual purchase price, whichever is higher.
- Indexation:
Apply the Cost Inflation Index (CII) to the FMV or actual purchase price (whichever is higher) to account for inflation. Use the CII of the year of acquisition (2001-02) and the CII of the year of sale (2023-24).
- Calculate Indexed Cost of Acquisition (ICOA):
ICOA = (CII for FY 2023-24 / CII for FY 2001-02) x FMV or Actual Purchase Price - Calculate Cost of Improvement (if any):
If you have made any improvements to the property, calculate the indexed cost of improvement using the CIIs of the respective years of improvement and sale.
- Calculate Indexed Cost of Improvement (ICOI):
ICOI = (CII for FY 2023-24 / CII for the year of improvement) x Cost of Improvement - Calculate Long-Term Capital Gain (LTCG):
LTCG = SP - (ICOA + ICOI + Transfer Expenses)
Example Calculation
Given:
- Sale Price (SP) = ₹1,00,00,000
- FMV as of April 1, 2001 = ₹10,00,000
- CII for FY 2001-02 = 100
- CII for FY 2023-24 = 348
- Cost of Improvement in 2010 = ₹5,00,000
- CII for FY 2010-11 = 167
- Transfer Expenses = ₹2,00,000
Calculation:
- Indexed Cost of Acquisition (ICOA):
ICOA = (348 / 100) x 10,00,000 = 34,80,000 - Indexed Cost of Improvement (ICOI):
ICOI = (348 / 167) x 5,00,000 = 10,41,317 - Total Indexed Costs:
Total Indexed Costs = 34,80,000 + 10,41,317 + 2,00,000 = 47,21,317 - Long-Term Capital Gain (LTCG):
LTCG = 1,00,00,000 - 47,21,317 = 52,78,683
Important Notes
Always consult a tax professional or use certified tax software to ensure accurate calculations and compliance with current tax laws.
Cost Inflation Index (CII) Table
| Financial Year | CII |
|---|---|
| 2001-02 | 100 |
| 2010-11 | 167 |
| 2023-24 | 348 |
FAQs
What if the property was inherited?
If the property was inherited, the cost of acquisition would be the cost to the previous owner. The holding period of the previous owner is also considered to determine if it is a long-term capital gain.
Can I claim any exemptions on the capital gain?
Yes, you can claim exemptions under sections like 54, 54EC, and 54F of the Income Tax Act if you reinvest the capital gains in specified assets within the stipulated time.