Selling your old house? Here is how to choose between 20% tax with indexation or 12.5% without indexation to reduce capital gains liability

How should you calculate long-term capital gains on the sale of an old property with or without indexation? Today's Ask Wallet Wise query decodes how to decide between the 20 percent and 12.5 percent tax options.

Moneycontrol's Ask Wallet Wise initiative offers expert advice on matters of personal finance and money. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.

House was purchased in October 2001 for Rs 4,25,000. The expected sale value is Rs 49 lakh. Brokerage payable for the sale transaction is Rs 50,000, and the society transfer charges are about Rs 13,000. The bills for renovation in 2001–2002 for Rs 2,00,000 and in 2012–2013 for Rs 1,25,000 are not available. Kindly help with the best possible tax calculation. Which type of calculation will be best suited for me, the old 20% method or the new 12.5% method?

Expert Advice: Even if you are not able to produce copies of the renovation bills, a certificate from an engineer about the cost of renovation would be sufficient. It is assumed that the renovation expenses were capital in nature and therefore allowable as cost of improvement while computing the capital gains.