r2i forum

My parents - both retired and Indian citizens in India - plan to sell an old flat that is on my dad's name. How much capital gains tax are they looking at? And are there any ways to avoid paying these taxes by investing the returns somewhere? The flat would be somewhere in the neighborhood of Rs. 20L I think.

I don't know the exact specifics but here is what I know

There is something called indexation which can be used to compute the inflation adjusted cost price of the house on today's date. The difference between the sale price and this indexation price is your profit and can be invested back in real estate within a year or so to avoid capital gains. You can also invest the profit in some 5 year bonds to avoid paying any taxes.

sftrade;313383I don't know the exact specifics but here is what I know

There is something called indexation which can be used to compute the inflation adjusted cost price of the house on today's date. The difference between the sale price and this indexation price is your profit and can be invested back in real estate within a year or so to avoid capital gains. You can also invest the profit in some 5 year bonds to avoid paying any taxes.

Thanks much, if someone has 2 or more flats, say, and sells both within the same financial year, and purchases new flat, will he be exempt from capital gains still ? or will he be charged with the cg tax ?

As long as you have held the flats for more than 3 years, you are eligible for capital gains exemption. You could either invest the gains in another house within 2 years or before one year of sale of your flat. You could also invest the gains in approved bonds (I guess for 5 years) to get exemption from tax.

Sajeev

sasajeev;313896As long as you have held the flats for more than 3 years, you are eligible for capital gains exemption. You could either invest the gains in another house within 2 years or before one year of sale of your flat. You could also invest the gains in approved bonds (I guess for 5 years) to get exemption from tax.

Sajeev

Those bonds are known as Section 54 EC bonds and REC (rural electrification corp) and NHAI(National Highways Authority of india) are the bonds that are qualified. Lockin period for reinvestment of CG is 3 years and not 5 years as few others have mentioned. These bonds earn sub 6% yield. If you have avenues to make a long term return of 10-12%, there is no need to chase these bonds and it is hard to get hold of these bonds syncing with timing of your sale.

sigma