How to save on Capital gains tax on sale of commercial property :
Don’t sell your commercial property without watching this video…. Or else you will miss on a chance to save on lakhs of rupees. (Watch till the end showing in the background)
Let us understand this better with the help of an example -(table shows on screen)
Consider Trump purchased an office premise in the year 2010-11 for Rs 1,00,00,000/- and sold it after 12 yrs (in 2022-23) for 2,20,00,000/-. Factoring in the indexed cost of acquisition, purchase of a new residential property and exemptions for the same u/s 54F, his reduced taxable gain was Rs 6.93 lakhs and the tax to be paid on it was Rs 1.38 lakhs.
Particulars | Amount (Rs.) |
Sale Proceeds | 2,20,00,000 |
Less: Indexed Cost of Acquisition (1,00,00,000*331/167) | 1,98,20,360 |
Long Term Capital Gains | 21,79,640 |
New House Property Purchase Price | 1,50,00,000 |
Exemption u/s 54F (Cost of New House*Capital Gain/Sale Proceeds) | 14,86,118 |
(1,50,00,000*21,79,640/2,20,00,000) | |
Taxable Capital Gain (21,79,640-14,86,118) | 6,93,522 |
Tax Rate | 20% |
Tax to be paid | 1,38,704 |
So you are paying only Rs 1,38,704/- only on a capital gains of Rs 1.20 Cr over 12 years.
But wait, this is not it.
If you don’t want to pay a single Rs in tax, you can invest the Taxable capital gain amount, i.e Rs 6,93,522 in govt bonds like NHAI,REC,etc and claim exemption u/s 54EC. To pay Rs 0 as LTCG, you need to be invested in these bonds for 5 years.
Read Caption if you dont want to go wrong while calculating your LTCG.
Comment “Give me more” to download the an easy to use Capital gains calculator for free
Caption :
1)If any money is spent in renovations or improvements have been done to the property, the cost of these improvements is also adjusted for inflation using CII.
2)Max amount you can invest in govt bonds to claim exemption u/s 54EC is Rs 50 lakhs
3)Also, last and the most important thing to keep in mind is that you can save this LTCG tax by investing in residential property only by either buying the property 1 year before the sale of commercial property or within 2 years after the sale of the commercial property.