How do you calculate the cost inflation index of a property ?

How do you calculate the cost inflation index of a property ?

Accroding to  Income Tax Act 1961 setion 48 discussed about  computation of capital gain.

There are two type of capital gain

1. Short term capital gain means capital gain arises on transfer of short term capital asset

2.Long term capital gain means capital gain arises on transfer of  long term capital asset

The income chargeable under the head capital gain shall be computed as following

Computation  of short- term capital gain

Full value of consideration

Less: a. Cost of acquisition

b. cost of improvement

c.Expenditure incurred

While in case of  computation of long term capital gain we need to calculate  indexed cost of acquation and  Indexed cost of improvement are deducted from full value of consideration.

The cost of acquisition and cost of improvement are indexed on the basis of certain percentage of the consumner price  index.

Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as cost of inflation index for the year in which the assest is transferred

S NO. Financial Year Cost Inflation Index
1. 2001-02 100
2. 2002-03 105
3. 2003-04 109
4. 2004-05 113
5. 2005-06 117
6. 2006-07 122
7. 2007-08 129
8. 2008-09 137
9. 2009-10 148
10. 2010-11 167
11. 2011-12 184
12. 2012-13 200
13. 2013-14 220
14. 2014-15 240
15. 2015-16 254
16. 2016-17 264
17. 2017-18 272
18. 2018-19 280
19. 2019-20 289
20. 2020-21 301

 

Computation of cost of indexed cost of acquisition

I cost of acquisition* Cost of indexed  of the year of transfer/ cost  of indexed of the year of acquisition

Computation of cost of indexed cost of improvement

cost of improvement* Cost of indexed  of the year of transfer/ cost  of indexed of the year of  improvement

Example

1. Y  purchase a land on 4.12.2004  for Rs. 10,50,000. This land was sold by him on 8.2.2020 for Rs.40,00,000. compute the capital gain for the assessment 2020-21

Sale consideration                                                                                         Rs. 40,00,000

Less: Indexed cost of acquisition   Rs.10,50000*289/113       Rs 26,85,398

Long term capital gain is Rs.13,14,602

 

2. Z  purchase a land on 6.8.2008 for Rs. 7,90,000. This land was sold by him on 3.2.2021 for Rs.35,00,000. compute the capital gain for the assessment 2021-22

Sale consideration                                                                                         Rs. 35,00,000

Less: Indexed cost of acquisition   Rs.7,90000*301/137       Rs 17,35,693

Long term capital gain is Rs.17,64,307

3. XZ  purchase a land on 6.8.2010 for Rs. 11,60,000. This land was sold by him on 3.2.2021 for Rs.35,00,000.   Expenses on transfer were 3% of sale price . compute the capital gain for the assessment 2021-22

Sale consideration                                                                                         Rs. 35,00,000

Less: Indexed cost of acquisition   Rs.11,60,000*301/167      Rs 20,90,778

Expenses on transfer                                                                       Rs. 1,05,000

Long term capital gain is Rs.13,04,222

 

 

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