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How-to-calculate-capital-gains-tax-after-shifting-base-year-from-1981-to-2001

 

How to calculate capital gains tax after shifting base year from 1981 to 2001

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1
Introduction-

How to calculate capital Gain tax after shifting base year from 1981 to 2001- Prior to the Finance Act, 2017, the base year for fixing CII was 1981. The Finance Act, 2017 shifted the base year from 1981 to 2001. 

Currently, the base year is fixed at 2001 and CII for 2001 starts at 100. The cost of acquisition of an asset acquired before 1 April 2001 shall be allowed to be taken as FMV as on 1st April, 2001. The cost of improvement shall include only those capital expenses which are incurred after 1 April 2001. 

Long Term Capital Gain from the sale of immovable property (land or building) after a holding period of 2 years will now qualify for long-term capital gains. Earlier this was three years.

 
See related posts : Cost Inflation Index
 
Information about Indexed Cost of Acquisition-

Cost of Purchase of asset / cost of index as on the year of asset purchase * cost of index as on the year of sale of asset-

Example -

If Mr. Ram has purchased capital asset in July 2001 for Rs. 30 lakh and sold in F.Y. 2017-18 ?

Answer-

Cost of acquisition = 30, 00, 000 (Cost of Purchase) / 100 (CII as on the year of asset purchase) * 272 (CII as on the year of asset sold) = 81, 60,000

 

How to calculate capital gains tax with the help of illustrations-
 
  • If the asset was acquired before 01-04-2001 and sold after 01.04.2017, the fair market value of the said property as on 01-04-2001 has to be indexed with new cost inflation index and the cost of improvement shall include only those capital expenses which are incurred after 01.04.2001-

Example 1-

If Mr. Ram has purchased capital asset for Rs.40 lakh in July 1990 and sold it to Rs. 3 crore in F.Y. 2017-18. The FMV of the said property as on 01.04.2001 was Rs. 1 crore. What will be the amount of capital gain?
 

Answer- New CII Index is applicable because the property was sold in F.Y. 2017-18-

Particulars

Amount (Rs.)

Amount (Rs.)

Sale Consideration

 

3,00,00,000

FMV as on 01.04.2001

1,00,00,000

 

Less: Indexation as per new CII, base year 2001-2002 is 100 and 2017-18 is 272

1,00,00,000/100*272

2,72,00,000

Long Term Capital Gain

 

28,00,000

   
  • If the asset was acquired after 01-04-2001, the purchase price has to be indexed with new cost inflation index-

Example 2-

If Mr. Ram has purchased capital asset for Rs.40 lakh in July 2001 and sold it to Rs. 1.5 crore in F.Y. 2017-18. What will be the amount of capital gain?
 

Answer- New CII Index is applicable because the property was sold in F.Y. 2017-18-

Particulars

Amount (Rs.)

Amount (Rs.)

Sale Consideration

 

1,50,00,000

Less: Indexation as per new CII, base year 2001-2002 is 100 and 2017-18 is 272

40,00,000/100*272

1,08,80,000

Long Term Capital Gain

 

41,20,000

   
  • If the asset was acquired after 01-04-2001 and also incurred there after some expenses on cost of improvement, the purchase price has to be indexed with new cost inflation index-

Example 3-

If Mr. Ram has purchased capital asset for Rs.40 lakh in July 2001, incurred some expenditure on cost of improvement in the financial year 2005-06 amounting to Rs. 10 lakh, the said property has sold to Rs. 1.5 crore in F.Y. 2017-18. What will be the amount of capital gain?
 

Answer- New CII Index is applicable because the property was sold in F.Y. 2017-18-

Particulars

Amount (Rs.)

Amount (Rs.)

Sale Consideration

 

1,50,00,000

Less: Indexed cost of acquisition, as per new CII, base year 2001-2002 is 100 and 2017-18 is 272

40,00,000/100*272

1,08,80,000

Less: Indexed cost of improvement, as per new CII, base year 2005-2006 is 117 and 2017-18 is 272

10,00,000/117*272

23,24,786

Long Term Capital Gain

 

17,95,214

   



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