Library / Income-tax Act, 2025: The Professional's Master Guide
51. Case Study 4: Senior Citizen Selling a House
Facts. Mr. Joshi, 72, a resident, receives pension of Rs. 6,00,000, FD interest of Rs. 4,00,000 and Senior Citizens Savings Scheme interest of Rs. 2,40,000. On 20 August 2026 he sells a flat bought in 2005-06 for Rs. 25 lakh (CII 117) for Rs. 1.5 crore; stamp value Rs. 1.45 crore; brokerage Rs. 1,50,000. He buys a new flat for Rs. 60 lakh in December 2026. He is considering investing Rs. 50 lakh in section 85 bonds. He pays health insurance of Rs. 50,000.
51.1 Step 1: capital gain under both options
Particulars | Without indexation (Rs.) | With indexation (Rs.) |
|---|---|---|
Sale consideration (stamp value is within 110%) | 1,50,00,000 | 1,50,00,000 |
Less: brokerage | (1,50,000) | (1,50,000) |
Less: cost (indexed: 25 lakh x 390 / 117, assuming CII 390) | (25,00,000) | (83,33,333) |
Long-term capital gain | 1,23,50,000 | 65,16,667 |
Less: section 82 (new flat) | (60,00,000) | (60,00,000) |
Balance | 63,50,000 | 5,16,667 |
Insight. Under the indexation option, Mr. Joshi needs to invest only about Rs. 5.17 lakh in section 85 bonds to make the gain fully exempt, instead of Rs. 50 lakh. Without indexation, even after Rs. 50 lakh in bonds, Rs. 13.5 lakh would remain taxable at 12.5% (Rs. 1,68,750). This shows why the computation must be done before making reinvestments: the bonds carry a 5-year lock-in and taxable interest.
51.2 Step 2: other income and regime choice
Particulars | Old regime (Rs.) | New regime (Rs.) |
|---|---|---|
Pension less standard deduction | 5,50,000 | 5,25,000 |
Interest (4,00,000 + 2,40,000) | 6,40,000 | 6,40,000 |
Less: section 153 (senior citizen interest) | (50,000) | Not allowed |
Less: section 126 | (50,000) | Not allowed |
Total income (normal) | 10,90,000 | 11,65,000 |
Tax (senior slabs in old regime) | 1,37,000 | 56,500 before rebate |
Rebate under section 156 | Not available (income above Rs. 5 lakh) | (56,500) |
Tax plus cess | 1,42,480 | Nil |
With the new regime and the indexation option on the capital gain (fully covered by reinvestment), Mr. Joshi's total tax is nil. Because his tax is nil, he should give Form 121 (old 15H) to his bank at the start of the year to avoid TDS of about Rs. 64,000 on his interest, and file his return to report the capital gain and exemptions.
Key point Section 82 requires the new house to be in India and held for 3 years. The bonds under section 85 must be bought within 6 months of the sale (by 19 February 2027). Any amount not invested by the return due date must be deposited in the Capital Gains Accounts Scheme. |
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