Calculation of capital gain on sale of flat

Dear Sir,

There would be no tax liability as the indexation cost of acquisition is more than sales consideration.

The indexation cost would be RS ~ 19.84 lakh. 

It is calculated as below:

RS 17 lakh*280/240= Rs 19.84 lakh

The rule is that Stamp Duty and Registration Charges should be paid on higher of two values i.e. Market Value or Circle Rate. 

You can mention the actual sales price in sales deed.

Declare actual Market Value in Sale Deed and Pay Stamp Duty & Registration Charges at Circle Rate. 

Since there is a huge difference between sale price and circle rate you need to calculate capital gain on circle rate and so your selling price would be 28 lakh and indecei cost of acquisition would be around 15 lakh and so your capital gain would be 13 lakh and tak on same would be around 2.6 lakh.

You can get claim of additional amount paid by you if you have proper bill.

However if you still show sale price 19 lakh then you might have to face litigation.

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

Thank you

Hello Sir,

As per Section 50C if a property is sold below the Circle Rate, the circle rate of the property would be deemed to be the rate at which property has been sold and capital gains tax would be levied assuming that the property has been sold at the Circle Rate.

Irrespective of the consideration for which the property has been sold, if it has been sold for a price below the Circle Rate, the circle rate would be assumed to be the Sale Price and Capital Gains Tax would be levied.

In your case, the capital gain would be around RS. 13 lakh (without considering total payment of RS 17) and it will be chargeable@20% plus applicable surcharge and cess.

You can claim the amount paid as cost of acquisition provided you have sufficient proof of RS 17 lakh.

However, in case the taxpayer claims before the Assessing Officer that the fair market value of the property is genuinely lower than the Circle Rate, the Assessing Officer may request the Valuation Officer to conduct a valuation of the property. In case a valuation is conducted by the Valuation Officer and

1. Value ascertained by the Valuation Officer is lower than the Circle Rate: The Value so ascertained by the Valuation Officer would be deemed to be the Sale Price
2. Value ascertained by the Valuation Officer is more than the Circle Rate: The Circle Rate would be deemed to be the Sale Price.

Thus, from the above it is clear that if a Reference is made to the Valuation Officer, the sale price to be considered for the purpose of Capital Gains cannot be increased but can only be decreased.

It is advisable to consider the circle rate as sales value and pay the applicable taxes on the same.

Otherwise, it is subject to litigation.

Hello,

You will have to consider the circle rate Rs. 28 Lacs as the sale consideration. Your capital gain would around Rs. 8 Lacs considering the cost of acquisition to be Rs. 17 Lacs (including eligible transfer expenses). 

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

As per Sec. 50C, it would be advisable to consider the circle rate as sale consideration.