• Sale of property and purchase of new property

Dear Sir/Madam,
My parents had invested in unlisted private cos of my cousin brother.Now  they are selling the shares to my cousin brother at the Book Value of the shares.For Sales Consideration we will consider the FMV of the shares 

1)But for Cost of Acquisition(COA), can we consider the Book Value of the Shares as COA.As taxes are already paid on the Company's profit and PAT is added to the Capital as part of reserves ,can I consider the book value of shares as the COA .In a Partnership Firm,Profit is added to Capital and withdrawal of capital is not considered as Capital Gain.Can we consider it in a similar way?
2)If Book Value of the Shares cannot be considered as COA and actual investment value would be considered as COA,can they pay LTCG without indexation at 10%

3)From the sales proceed from sell of these shares they are planning to buy an under construction home whose possession is after 4 yrs and want to gift it to my sister immediately(in 1 month) after paying Stamp Duty and  GST for the under-construction property
They would transfer the money to her for making slabwise payment to  the builder over 4 yrs
a)Can my parents claim the Capital  Gain Tax  Exemption u/s 54F
b)Pls confirm Stamp Duty for Maharashtra for transfer of residential property from parents to  their daughter would be 200Rs.
Asked 1 year ago in Capital Gains Tax

1) COA would be the actual amount paid/invested by your parents

2) 20.8% with indexation of COA

3) To claim exemption u/s 54F, new residential house property should be purchased in the name of parents and COA for such house should be paid by them 


For detailed discussion you may opt for phone consultation

Vivek Kumar Arora
CA, Delhi
4838 Answers
1037 Consultations

5.0 on 5.0

As per the provisions of section 55 of Income Tax Act, 1961, assessee should consider the Actual Investment Value for calculating Cost of Acquisition (CoA). Since the book value comprise of various other components, therefore to ascertain the actual cost of acquisition, it is pertinent for the assessee to consider the Actual Investment value as Cost of Acquisition (CoA).


As per section 112 of Income Tax Act, 1961, being an individual invested in the shares of unquoted shares of a company shall be liable to pay long term capital gain tax @ 20% of capital gain under the head “Income from Capital Gain”. However, the benefit of indexation shall be available in such cases.

It is pertinent to note that the rate as suggested by you i.e., 10% without indexation shall not hold true in your case as the mandatory condition to satisfy for availing such rate is that the assessee should be non-Resident.

We are presuming that the assessee i.e., your parents are Resident of India.


As per the provisions of Income Tax Act, 1961, the assessee who has earned capital gain should make investment in new property. However, if the assessee can prove that new property purchased is purchased using the money from sale of shares then such exemption can be claimed. However, the only condition is that the daughter cannot transfer such asset to any person for at least 3 years from the date of transfer of such new asset from the assessee to the daughter.


Various judicial authorities have given judgement on the same line and below are reference of one such case here as well. In the case of Income-tax Officer, Non-Corporate Ward 9(1), Chennai v. Abdul Hameed Khan Mohammed, the judicial authority observed that the assessee can transfer such new asset to his/ her daughter without consideration which shall be considered as gift. However, it has been observed that the daughter shall not transfer such asset to any person for at least 3 years from the date of such transfer.


However, it is advisable that parents should make entire payment of property and then either gift property to daughter post registration or get registration in name of daughter.


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

Thank you.

Naman Maloo
CA, Jaipur
4271 Answers
97 Consultations

5.0 on 5.0

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