Cost Inflation Index for the purpose of computing Long Term Capital Gain
In indian income tax, for the purpose of calculating long term capital gain, index are used to work out the present value of money spent on acquiring the said asset in the previous years. For example, if we purchase a flat for 5 lakhs in 81-82 and sell it now for 50 lakhs in 2009-10, the indexed cost of value of the flat for the purpose of cost of purchase will be Rs. 5 lakhs x 632/100 = 31.6 lakhs using the index against the said financial year i.e. 2009-10. The sale vaue is Rs.50 lakhs and hence capital gain will be Rs.50 lakhs — 31.6 lakhs = 18.4 lakhs. Only on this capital gain tax has to be paid. Or new house /flat has to be purchased in order to avoid capital gain tax subject to certain conditions which are available in some other topics in this site.
FINANCIAL YEAR COST INFLATION INDEX FINANCIAL YEAR COST INFLATION INDEX
C . R. Venkata Ramani