• Capital gains on house property

I got plot through partition during 1986 and constructed house in October1987 with project cost 1,40,000/- (bank loan Rd 1,02,000/-) and again constructed one room on first flour with project cost 1,00,000/-( bank loan 48,000/-).during December 1996 
Now I sold this house for aRs 55,00,000/- during August 2019.( the buyer paid TDs 1% TDS ) by deducting Rs 55,000/-
now please clarify 
1. what is the capital gains in this property
2. to avoid income tax I want to reinvest by puchasing new house.what amount should invest in new house purchasinh
Asked 4 years ago in Capital Gains Tax

Dear Sir,

 

Hope you are doing well !!

 

As such 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 cost of acquisition.

 

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

 

Further,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 improvements.

 

-You need to reinvest the capital gain amount in new property to get full exemption.

 


 

We have handled such cases before. We may help you in capital gain calculation.

 

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

As such 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 cost of acquisition.

 

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

 

Further,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 improvements.

 

-You need to reinvest the capital gain amount in new property to get full exemption.

 

 

We have handled such cases before. We may help you in capital gain calculation.

 

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hello Sir,

 

In respect of capital asset acquired before 1st April, 2001, the cost of acquisition will be higher of the actual cost of acquisition of the asset or fair market value of the asset as on 1st April, 2001. 

 

It is advisable to get the FMV/ valuation of the property as on 01.04.2001 done from the registered valuer.

 

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

 

-Cost incurred by you for development of the plot would be treated as improvement cost.


- Indexation benefit is available for cost of acquisition as well as cost of improvement.

-Only capital gain amount is required to reinvest for capital gain exemption.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Since the plot and house was constructed before 01.04.01 you need to get it's valuation done for 01.04.01 by government approved valuer and after than you need to calculate capital gain and to save capital gain tax you need to just invest capital gain amount in new house.

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

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Hello,

 

First, you need to get a valuation report from a certified valuer for the property value as on 1st April 2001. The value would be deemed your cost of acquisition of the property. Then it would be indexed using inflation index up to F.Y. 2019-20. 

Capital Gain would be Sale consideration(i.e. Rs. 55 Lakhs) minus the indexed cost of acquisition(calculated as above) and transfer expenses if any.

For exemption u/s. 54, you need to invest the capital gain amount in a new house property within a specified time period.

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

Hi

 

Hope the query is resolved by the other question posted by you.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

In order to claim exemption from capital gains, you can invest the capital gain amount in:

 

1. Residential house property within 2/(3 for construction) years of sale of old property and claim exemption under section 54.

 

2. Eligible bonds under section 54EC. Such bonds shall be redeemable after 5 years.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

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