Query 1]

  1.  As per your answer in the earlier issues of Tax Talk, Capital gains is to be calculated by deducting the indexed cost of acquisition from the sale price. What does indexed cost means? Is it market price or Purchase price as per Sale deed? Whether it includes cost of Registration & Stamp Duty? What is cost inflation index? Please elaborate the terminology of complicated Capital Gain for general use of all.

  2. You have mentioned that capital gains is not related in any way to home loan (except condition of 5 year of time binding for principal repayment benefit)
    My question is, if I have paid nearly 2,00,000/- as interest part to home loan in 5 year time (Approx Rs. 50,000/- Per Year of total EMI out of which nearly Rs. 10,000/- is principal & Rs. 40,000/- Interest part), Can I deduct interest repaid to calculate Capital Gain? (Sale Price Rs. 12 Lacs & Cost of Purchase 5 year ago Rs. 6 Lac, as per you reply it comes to Rs. 6 Lacs).
  3. Whether it is necessary that full capital gain is actually invested in another property for tax benefit or Only Purchase of new property should be higher in amount than capital gain? Can I purchase another flat of Rs. 24 Lacs and invest my share as only Rs. 4 Lacs from capital gain and utilize balance Rs. 2o Lacs elsewhere (like repaying car loan etc)? []


  1. Explanation (iii) to section 48 defines the term “indexed cost of acquisition” as the amount which bears to the cost of acquisition the same proportion as the COST INFLATION INDEX (CII) for the year for which the assets is transferred bears to the cost inflation index for the first year in which the assets is first held by the assesee.

    (eg, Mr. X has purchased a flat for in the year 1988-89 Rs. 1 Lacs and have sold the same in the F.Y. 2009-10. The indexed cost of acquisition in this case shall be = Rs. 1 Lacs * 632/ 161= Rs. 3.92 Lacs).

    Indexation benefit is given to the assesee on transfer of a long term capital assets to compensate the inflationary effect of economy.
    For the common benefit of all our readers, we are presenting the Cost Inflation Index (CII) since 1981:

S.No. Financial Year C.I.I S.No. Financial Year C.I.I
1 1981-82 100 2 1982-83 109
3 1983-84 116 4 1984-85 125
5 1985-86 133 6 1986-87 140
7 1987-88 150 8 1988-89 161
9 1989-90 172 10 1990-91 182
11 1991-92 199 12 1992-93 223
13 1993-94 244 14 1994-95 259
15 1995-96 281 16 1996-97 305
17 1997-98 331 18 1998-99 351
19 1999-2000 389 20 2000-01 406
21 2001-02 426 22 2002-03 447
23 2003-04 463 24 2004-05 480
25 2005-06 497 26 2006-07 519
27 2007-08 551 28 2008-09 582
28. 2009-10 632  

It may be noted that the cost of acquisition is the total of purchase price plus stamp duty, Registration expenses & other expenses of capital nature incurred for acquiring the title of the property.

  1. Interest paid on housing loan in normal course doesn’t form the part of the cost of acquisition and would not be deductible expenses while calculating the long term capital gain.
  2. (i) For exemption u/s 54 (i.e., capital gain arising on transfer of a residential house property), entire Long term capital gain only is required to be invested for full exemption.
    (ii) For exemption u/s 54F (i.e., capital gain arising on transfer of any capital assets other than residential house property), entire sale consideration is required to be invested for full exemption.

Query 2]  I have received interest, Salary & Share of Profit form a partnership firm of Rs. 3,71,209/- during the F.Y. 2009-10.

I have also suffered a loss of Rs. 62,184/- during the F.Y. 2009-10 as a result of transacting in the share market in F & O segment.

I also have earned a S.B A/c interest of Rs. 2,061/- & FDR Interest of Rs. 16040/- during the F.Y. 2009-10.

Except above, I don’t have any other income during the F.Y. 2009-10.

My query is whether I can set off my Loss against my other income? I am getting a conflicting view about the set off. Please elaborate. Is it possible to show such loss in ITR-3? Should I file the return in ITR-3 or ITR-4?[Ramesh K. Malpani]


  1. The income from Derivative transactions (F&O) is not a speculative transaction and is normally taxable under the head “Income from Business & Profession”. The interest/ remuneration/share of profit from a partnership firm is also taxable under the head “Income from Business & Profession” You can set off the loss in  F & O transactions against the Interest / Salary /Remuneration received from the Partnership Firm.
  2. The return in such case is required to be filed in ITR-4. The set off is required to be mentioned in “Schedule CYLA” at Sl. No. (iii) & (vii).


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