WILL THE YEAR OF SALE EFFECTS ON TAXABLE CAPITAL GAIN

KNOWLEDGE BANK FROM B KANAGA SABAPATHY

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“Questions and Opinions – 26/06/2022”.

With best wishes,

B. KANAGA SABAPATHY
bkvaluer@gmail.com
www.bkanagasabapathy.com

QUESTION & OPINION

Question :
In one of the Questions & Opinions, you have advised the owner to sell his property after 01.04.2022 when he wanted to sell in the 3rd week of March. I do not understand the significance to postpone the sale by two weeks. Can you explain?

Opinion :
The concerned question & opinion was related to capital gains in order to save the capital gain tax.
Assume the sale consideration is Rs. 1.8 crores and FMV is Rs. 40 lakhs as of 01.04.2001.

If the property is sold in 3rd week March 2022 :
FMV as on 01.04.2001 = Rs. 40,00,000
C.I.I. for 2001 – 2002 = 100
C.I.I. for 2021 – 2022 = 317
Indexed cost of acquisition = 40,00,000 x 317/100 = Rs. 1,26,80,000
Sale consideration = Rs. 1,80,00,000
Capital gain = Rs. 53,20,000
1,80,00,000 – 1,26,80,000
Tax @ 20% = Rs. 10,64,000/-

If the property is sold in 02.04.2022 :
FMV as on 01.04.2001 = Rs. 40,00,000
C.I.I. for 2001 – 2002 = 100
C.I.I. for 2022 – 2023 = 331
Indexed cost of acquisition = 40,00,000 x 331/100 = Rs. 1,32,40,000
Sale consideration = Rs. 1,80,00,000
Capital gain = Rs. 47,60,000
1,80,00,000 – 1,32,40,000
Tax @ 20% = Rs. 9,52,000/-
By delaying the sale by two weeks, the assessee is able to save 10,64,000 – 9,52,000 = Rs. 1,12,000/-.

Request

The readers may highlight the errors if there are any. Suggestions for further improvements are certainly welcome. Similar topics may also be suggested.

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