Hi All, My mother bought a flat in Chennai [Alwarpet] in the year 1995 for Rs. 9,00,000. We are planning to sell the flat now. We realized that to find out the Capital Gains amount, we should consider Cost Inflation Index of 2001 as the base year. So, we need to find out the Actual Cost Price of the flat as of 2001 and not consider 1995 as the Actual year of purchase. For this purpose, we need the guideline value of the land and building value of our flat as of 2001. We got the guideline value of the Land from registration office (Rs 3342 per sq. ft.). While trying to find out the building value for 2001, we were told that we will be charged 2% of our property value when we approached Public Works Department (PWD). The formula we used for calculating Capital Gains: Indexed Cost of Acquisition = (Cost of purchase in 2001) * (CII Of Year of Sale)/[CII of Year of Purchase(i.e. 2001)] i.e Cost of purchase in 2001 * (282/100) Capital Gain = (Sale Price MINUS Indexed Cost of Acquisition) We have a few concerns regarding this: 1. Is the process that we have followed to calculate Capital Gains correct? 2. Is there a way to find approximate building value of the flat as of 2001 other than approaching the PWD as it is quite expensive? Also, are we within the legal limit if we collect the EB caution deposit from the buyer as it a huge sum? Please suggest us best ways to handle this situation.
Hi
1., Yes, calculations of capital gains have to be done in the above manner. CII for FY 2018-19 is 280.
2. You can check the stamp duty value of the property through the registration department. There is no fees involved. Or, you may check the ready reckoner rate. Also, you may get the valuation done from a registered valuer.
1) Yes the process adopted by you is correct.
2) You can approach the registered valuer for the valuation of the property or get stamp duty value as on 01.04.2001.
Yes you can collect the initial amount from the buyer as per the agreement and ask the buyer to deduct TDS on each payment made.
Hi,
Hope you are doing well !
1. Yes, the above process is absolutely correct.
2. You have many options, please find below the list:
a) Find out the average sale price of similar properties in the neighbourhood, which were sold in the year 2001.
b).Look at circle rates or Guidance Value or Ready reckoner rate
c)Take help of a registered valuer
d)Real estate indices, such as the National Housing Bank’s (NHB’s) Residex, and two indices of the Reserve Bank of India (RBI)—Housing Price Index (HPI) and Residential Property Price Index (RPPI).
Yes, you can collect the amount as per the agreement and pay the tds installment wise.
Thanks & Regards,
Payal Chhajed
Hi,
Please refer to the replies inline below:
1. The way of computing capital gains is not incorrect but it is incomplete.
2. Since the property have been bought before 2001, you must have the valuation done for this base year. If you need any help, I can try getting a better cost for valuation. Moreover, the point is not only saving of the expenditure, most important if you will take any guideline value without taking a report from the registered valuer, then the computation of gains shall be challenged by the tax department and they may charge penalties. Instead, if you get the valuation done, it may help you in saving complete capital gains and no tax flow.
3. Can you please explain EB deposit a bit ?
Thanks
Damini
1). Process is correct
2). You can get valuation certificate from registered valuer.
yes collect deposit & get agreement made for same.
Hi,
1. Yes, the process followed by you is correct.
2. You can get the valuation done by a registered valuer.
Regards,
Nikhil.
1. Yes, the process of calculation is correct. However, the cii for FY 2017-18 is 280 instead of 282.
2. You can get the property valued from an approved valuer.
