Tax Query: Income tax, LTCG and HRA exemption
Tax
I want to sell a flat for Rs 25 lakh, which I bought 10 years ago for Rs 8 lakh. What will be the income tax implications?

Any immovable capital asset like land or building held for more than 24 months is considered as a long-term capital asset. Since you bought the flat 10 years ago, i.e. 2009, it will be treated as a long-term capital asset for the income tax purposes. Any income/loss arising from the sale of such flat will be considered as long-term capital gains/losses

For the calculation of gains from the sale of such flat, purchase cost/acquisition cost will be indexed by applying the cost inflation index (CII). This is necessary to adjust the rate of inflation over the years of holding the capital asset. 

The capital gains tax calculation is as follows: 

Particulars Amount (in Rs.)
Full value of consideration/sale value (a) 25,00,000
Cost of acquisition 8,00,000
CII of the year 2009 148
CII of the year 2019 289
Indexed cost of acquisition – 8,00,000*289/148 (b) 15,62,162
Capital gains on sale of flat [(a)-(b)= (c)] 9,37,838
Tax on such capital gains (c)* 20% 1,87,568

Such long-term capital gains are taxed at a rate of 20%. You will have to pay a tax of Rs 1,87,568 in the FY 2019-20.  

Can I claim HRA exemption if I pay rent to my parents?

You can claim HRA deduction if you are paying rent to your parents for the house property owned by them. However, your parents will have to disclose such rental income as income from house property. In another case, if you are staying with your parents in a rented flat and they are paying the rent, you can’t claim the HRA deduction for the same.

For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in.

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