How to Calculate Long-Term Capital Gains Tax on Property in India
Calculating Long-Term Capital Gains (LTCG) tax on property in India requires a clear understanding of the Income Tax Act's provisions. This tax arises when you sell a property held for more than 24 months. The tax is calculated on the profit earned from the sale, after accounting for permissible deductions. To compute the long term capital gain, you must first determine the indexed cost of acquisition and improvement. Indexation takes inflation into account, thus reducing tax liability. Begin with the property's acquisition cost, and apply the Cost Inflation Index (CII) to calculate the indexed cost. The formula is: Indexed Cost = (Cost of Acquisition or Improvement) x (CII of the year of sale / CII of the year of acquisition or improvement). Let's illustrate this with an example. Suppose you bought a property for ₹30,00,000 in the financial year 2005-06, and you're selling it for ₹70,00,000 in the financial year 2023-24. The CII for 2005-06 was 117, and for 2023-24, ...