Capital gain

Dear Sir,

Hope you are doing well !!

-As the date of acquisition falls prior to 1 April 2001, you have a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as your acquisition cost. 

So, firstly you need to get the valuation report of property as on 01.04.2001.

-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.

Exemption from long term capital gains

You can claim an exemption from LTCG (Maximum ), under section 54 of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.

Section 54 benefit increased from one residential house to two residential house for a taxpayer having capital gains up to Rs. 2 Crore.This exemption will be allowed once in lifetime of the individual assessee.

Alternatively and/or additionally, you can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.

-The capital gain will be taxed at 20.8%. You can save tax by investing the sale amount in a new house or purchasing capital gain bonds. 

Hi,

1. Total Cost of Acquisition will be your Fair Market Value as on 1.4.2001 for the respective property since any property purchased before 1.4.2001, you need to consider the fair market value of such property as in 1.4.2001. In order to ascertain that, you need to obtain a valuation report. 

2. Capital Gain Calculation will be =>Net Sale Consideration (52L)- Expenses incurred on transfer - Indexed Cost of Acquisition (FMV Obtained* 280/100) on a proportionate basis as per flats

3. Yes, section 54 is applicable. Alternatively section 54EC is applicable too. 

4. Tax implication wont be anything different from how you compute now. It depends on your sale consideration, indexed cost of acquisition/improvement.

Please rate my answer if it satisfied your requirements. You can call me in case of any further assistance towards your computation of capital gains. 

When  was this JDA entered?

Did the land owner pay proper Capital gain at time of such JDA.

If yes then the capital gain would be sale price less FMV of flat when such JDA was completed.

when capital gain was paid on JDA you might have taken benefit of section 54.

You can again claim exemption u/s 54 for such capital gain.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Please call to discuss in length.

Hi

There are 2 series of capital gain transactions here.

1. Transfer of rights to builder.

2. Sale of owner share flats to third party.

As per the new amendment in law, capital gain on 1 above is taxable in the year of completion. However, such provision doesn't apply if the flat/(s) are sold before completion.

So depending upon the date of entering JDA and selling of flat to 3rd party, capital gains have to be determined whether short term or long term. In case of short term capital gain, no exemption is provided.

Hello,

In case of an assessee being individual or Hindu undivided family, who enters into a JDA of a project, the capital gains shall be chargeable in the previous year in which the certificate of completion for the whole or the part of the project is issued by the competent authority. However, the provisions of this sub section shall not apply where the assessee transfers his share in the project on or before the date of issue of the said certificate.

So you need to provide the date of entering JDA, to calculate the capital gain and cost of acquisition of the flats.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani