A resident client plans to sell a flat held for many years. How would you advise on capital gains tax?
What the interviewer wants to hear
- Confirms holding period and long-term status
- Computes gain with cost, improvement and transfer expenses, considering available rate options
- Explains exemptions like reinvestment in a house or specified bonds
- Considers TDS by the buyer and stamp duty value rules
- Plans timing and documentation
Model answer
First I confirm the holding period: land or buildings held for more than 24 months give long-term gains. I gather the purchase deed, cost of improvement and expected sale price, and check the stamp duty value, because if the sale price is below it beyond the tolerance, the stamp value may be taken as the sale consideration. I then compute the gain. After the 2024 changes, long-term gains are generally taxed at 12.5% without indexation, but for resident individuals who acquired the property before 23 July 2024 there is an option to compute tax at 20% with indexation, so I compare both. Then I explain exemptions: reinvesting the gain in a residential house under Section 54, or in specified bonds under Section 54EC within the time and limits, or depositing in the capital gains scheme until reinvestment. I also remind them the buyer will deduct TDS, and plan the timing and paperwork accordingly.
Can you answer it under time pressure?
Take a timed medium round and get scored on every answer.
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