A retiree sold a long-held property for ₹1.74 crore after retirement, raising significant tax implications for capital gains taxation. According to reports from Personal Finance News, the property was purchased before July 23, 2024, making it eligible for indexation benefits under the current tax framework.
The taxpayer has two options for capital gains taxation on the property sale. As reported by Personal Finance News, they can pay 12.50% tax on plain long-term capital gains of ₹80,82,830, totaling ₹10,10,354. Alternatively, they can opt for 20% tax on indexed long-term capital gains, which requires calculating the indexed cost using the Cost Inflation Index (CII) of 148 for FY 2009-10 and 376 for FY 2025-26.
The indexed cost calculation results in ₹2,36,70,648, as reported by Personal Finance News. Since the sale price of ₹1.74 crore is below the indexed cost, the taxpayer does not owe any tax liability. This means the option of paying 20% on indexed cost brings the total tax liability to zero, making them eligible for a full refund of any advance taxes paid.
Regardless of whether the taxpayer claims indexation benefits, they must file ITR-2 as their primary tax form, according to Personal Finance News. This requirement applies as long as they do not have any business income. If they have business income, they must use ITR-4 for presumptive taxation or ITR-3 for regular assessment.
The taxpayer's pension income of ₹5,00,160 generates tax liability of ₹5,008, which qualifies for full rebate under Section 87A of the Income Tax Act, 1961, as reported by Personal Finance News. This rebate significantly reduces their overall tax burden, making the property sale transaction more tax-efficient despite the capital gains implications.
