• Problem with arriving at Tax computation for real estate project

I have constructed 6000 sqaure feet building (each flat 1000sft)  on 267 square yard land.
Land purchased in 1991 for 8000 INR. Today Registrar value  for land is 16 Lakhs.
Building construction expenses is 1.05 crores
I have sold the building for 175 Lakhs. Got TDS dedcution for 1.75 Lakhs
Here are my questions:

1. How do I arrive at the computation of expenditure for computing Income Tax in view of long term gains on my land?
Is my expense 1.05 crores+8000 rupees
or is my expense 1.05 crores+16 lakhs
or is it 1.05 crores + indexation of (8000)

2. I have maintained tax paid receipts for every bill. But manual labour I paid sometimes 20000 rupees by cash. Will it count as expenditure or limitation of 10000 cap will exist? How does IT view my 20000 cash expenses paid to labour?

3. For my next project how do I deal with sand purchase. Only cash is being accepted by the suppliers. I am willing to give 100% through cheque. None are ready to take. How do I deal with the situation? In the present case I have not accounted cash paid to sand as expense.

Asked 8 months ago in Capital Gains Tax from bangalore, Karnataka

Dear Sir,

Is Real estate your business? If yes then limit of Rs.10,000 would be applicable and profit will be computed instead of capital gain.


Vivek Kumar Arora
CA, Delhi
1858 Answers
63 Consultations

5.0 on 5.0


If you are trying to compute your capital gains the cost will be 1.05 cr + indexation of 8000.

However if this is your business, then the cash limits of 10k will be Applied and you will need to compute the profits from the project rather than capital gains .



Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0


All the below responses are given, considering that you are not into business of real estate and your profit will be taxed as capital gain:

1. Your cost will be 8000+1.05 crores (both indexed)

2. Limitation of 10k will not be applicable

3. You can give the amount in cash in such a genuine cases.

Abhishek Dugar
CA, Mumbai
3576 Answers
165 Consultations

5.0 on 5.0


You will get indexation benefit till the date you started construction on the land and it will be chargeable under Capital Gains.

That value plus 1.05Cr shall be your business cost. So 1.75 - 1.05 - Indexed cost of 8000(only till the date you started construction) will be business profit.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.


Rohit R Sharma


Rohit R Sharma
CA, Mumbai
2104 Answers
92 Consultations

5.0 on 5.0

It seems you are into the business of Real estate ,so no capital gain will be calculated ,instead Income /loss from business will be computed.and cap of Rs 10000 would apply for cash payment.

Swati Agrawal
CA, Indore
749 Answers
2 Consultations

5.0 on 5.0

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