Last Updated on December 21, 2023 at 5:17 pm
We had recently discussed how to enter STCG and LTCG from equity shares and mutual funds in ITR2 or ITR3. We now follow this up with a guide to enter capital gains from the sale of property in ITR2 or ITR3.
Do check out our earlier articles on tax filing:
- How to enter mutual fund and share capital gains in ITR2 (or ITR3)
- How to use MF capital gains statement for STCG & LTCG entries in ITR2 (or ITR3)
As with any capital asset, the cost of sale and the cost of acquisition (purchase) are the keys to computing capital gains. CG from property use index cost of acquisition. That is, the purchase price of the property will be inflated using the cost inflation index to the financial year of sale.
For example, a property that cost 50,00,000 on 1st Jan 2009 will today (1st March 2022, financial years of sale) cost 1,15,69,343. This value will be auto-calculated by the ITR2 or ITR3 form and will be used to compute the capital gain = Full value of consideration minus the indexed cost of acquisition.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
If the property was sold for Rs. 2 Crore in March 2022, the actual capital gain is Rs. 1.5 Crores where the taxable capital gain is only Rs. 84.3 lakhs!
However, there is an issue with the cost of acquisition. If we had purchased the property after 31/03/2001, there is no issue, we can enter the cost as per the sale deed.
If the property was acquired on or before 31/03/2001, the fair market value as of 01/04/2001 should be entered. The reason for this is the cost inflation index was reset from 1st April 2001.
There are two ways to obtain fair market value as of 01/04/2001
- Consult a property evaluator who would visit the premises and estimate this. This is what CAs would recommend.
- Use the old cost inflation index data to compute this value. See: Cost Inflation Index Historical Data. Many CAs may not agree with this but I don’t see why this should not be done.
How to enter capital gains from the sale of property in ITR2 (or ITR3)
In the CG schedule, select, “Land or Building or both”
Enter the date of purchase and sale. The sheet will automatically determine if the CG is short-term or long-term.
The next step is to enter the sale value (full value of consideration) and the stamp duty property value. The full value can be at most 10% lower than the stamp duty property value. If it is any lower, then only the stamp duty value will be used.
Next, the cost of acquisition should be entered. The cost of acquisition with indexation will be auto-calculated.
Cost of improvement: Any expense made on the property with an aim to improve its value can be shown as a cost of improvement. These expenses made in different financial years can be entered separately and their indexed cost will be auto-computed.
For properties improvements done on or before 1st March 2001, 2001-02 should be entered as the FY of improvement and fair market value as on 1st April 2001 should be used. We can use the old cost inflation index scale to determine this.
Next expenditures connected to the transfer such as brokerage, commissions, stamp duty cost, travelling expenses or registration fees can be entered.
Deduction under section 54/54B/54EC/54F/54GB: If the proceeds from the property sale are reinvested in a residential house or if section 54EC bonds are purchased, then tax payable on the sale can be proportionally lowered. This is a huge section in itself and cannot be covered in this article. Interested readers may consult this guide by CA Karan Batra: Section 54, 54EC, 54F: Capital Gain Tax Exemption in 2022.
Finally the details of the buyer. If the buyer’s Pan and Aadhaar are mentioned in the sale deed or if the buyer of an immobile property deducted TDS at 1% while making the payment to the owner or seller of the property then Pan and Aadhaar must be mentioned here. The TDS is applicable only for transactions over Rs. 50 lakhs. See this resource for other conditions under section 194IA.
This completes the process of entering capital gains from the sale of property in ITR2 (or ITR3)
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)