You can save Capital Gains tax, on the profit that you earned from selling a house by using the cost inflation index. This is a number, that you must multiply the amount of money that you paid to buy the house with.
What this does is, it brings the cost of the house in line with the value of the money’s worth today. This is because over the period of time goods have become costlier and in effect you can buy less with the same amount of money.
So, the value of your money has gone down. To compensate for the loss, you are allowed to use indexation.
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