# What is indexing in I. Tax for calculating long term capital gain and how to calculate the same?

I purchased a piece of land in 1994 for 1 lac. Now selling the same for 10 lacs in 2007. How should I calculate my income tax liability?

## 3 Replies to “What is indexing in I. Tax for calculating long term capital gain and how to calculate the same?”

1. N.J.Reddy says:

Say, land parched on 1.4.1994; & sold on 1.4.2007

Now the calculation:
Index on 1994-95= 259
Index on 2007-08= 551
Inflation index cost of land:
100000*551 / 259= 2,12,741 (indexed cost)
Land sold for———— = 10,00,000
Less cost of purchase= 2,12,741 (indexed cost)

indexing gain———– = 7,87,259
Tax @20% Flat on gain= 787259*20%=1,57,452
+3% Education cess on Rs.1,57,452/-=4,724
Total tax & Educatioin cess 157452+4724=1,62,176/-

If you have no other income, then you can reduce your basic exemption limit and pay tax on balance amount.

Example: If you are a male <65 years. Your tax free basic exemption limit is Rs.1,10,000. You have no other income than the above said capital gains. Then your income will be 7,87,259 less 1,10,000= 6,87,259. On this amount you have to pay tax @20%.

2. taxpert says:

Cost Inflation Index
http://www.allindiantaxes.com/cit.php
Financial Year
Index

1981-82
100
1990-91
182
1999-00
389

1982-83
109
1991-92
199
2000-01
406

1983-84
116
1992-93
223
2001-02
426

1984-85
125
1993-94
244
2002-03
447

1985-86
133
1994-95
259
2003-04
463

1986-87
140
1995-96
281
2004-05
480

1987-88
150
1996-97
305
2005-06
497

1988-89
161
1997-98
331
2006-07
519

1989-90
172
1998-99
351
2007-08
551