Need your help to calculate the LTCG on my father's disputed land, which he sold recently -- Below are the details: Land Purchased Date: 28-Mar-2008 Land Purchased Price: 10,58,000.00 Cost of House Built on the Land: 5,00,000.00 Selling Date: 12-Feb-2018 Selling Price: 60,55,000.00 Settlement Amount: 15,00,000.00 (Due to dispute between the sellers who sold to us, it went to court and we got it settled. We have a court order mentioning the amount of 15 lacs paid to the other party) Query-1: Pls help me whether the settlement amount can be claimed while calculating capital gains tax? Query-2: Also, help me how much will be the long term capital gains for the above mentioned sale transaction?
Hi
1. Yes.
2. The settlement amount and cost of construction of house shall be indexed from the year of such payments. You should possess valid proofs for payment of 5 lacs for construction of house. Excluding the above two costs, capital gains are coming around 38.25 lacs.
LTCG is taxable @20%. You may also opt for reinvestment based exemptions under section 54.
Hi,
Hope you are doing well !!
1. Yes, you can claimed while calculating capital gains tax.
2. Please share the date of actual payments of cost of house built and settlement amount for indexation.
There will a long term capital gain of Rs.38.25 lacs and tax would be Rs.7.95 lacs (without considering indexation cost of house built and settlement amount).
It is calculated as below:
Sale consideration -Indexed COA= (Rs 60.55 lakh- Rs 22.30)= Rs.38.25 Lakh
The indexed COA= Rs 10.58 lakh /129*280=Rs. 22.30 lakh.
To calculate the long-term capital gains tax payable, the following formula is to be used:
Long-term capital gain = full value of consideration received or accruing – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where:
Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.
Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement.
Hi Payal, Thank You for your reply. The date of actual payments of cost of house built is: 01-Mar-2010 and The settlement date is: 07-Feb-2019. Pls help me with the final LCTG with calculations.
Hi,
The indexed COA= Rs 10.58 lakh /129*272=Rs. 22.30 lakh.
The indexed COI= Rs 5 lakh /148*272=Rs. 9.19 lakh.
Settlement amount= Rs 15 lakh.
LTCG=Sale consideration -(Indexed COA+Indexed COI+ Settlement amount)
(Rs 60.55 lakh- (Rs 22.30+Rs 9.19+ Rs 15)= Rs.14.05 Lakh.
The tax would be Rs. 2.92 lakh (20.8% on Rs 14.05 lakh)
Hi,
- Yes you can claim the settlement amount as a part of cost of acquisition.
- LTCG would be 13.13 lacs
Thanks
22.96 lakh is your indexed cost of acquisition
9.45 lakh is your indexed cost of improvement.
Therefore your pure capital gain would be 60.55 less 32 lakh which comes to 28 lakh and capital gain on same would be @20% 5.6 lakh.
Your selling date is in 2019 or 2018?
I am assuming it's 2019.
Secondly there are many case laws where such settlement is allowed as cost of improvement and keeping that in mind your ltcg would be 13 lakh and so tax would be around 2.6 lakh.
Do remember that they are case laws and so you might face initial scrutiny but you will succeed.
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Thank you
