Capital gains on sale of pagdi flat (tenancy rights)

Capital gains on sale of pagdi flat (tenancy rights)

My father-in-law sold his pagdi flat (sale of tenancy rights) in Mumbai in Jan this year.
The pagdi was paid more than 40 years back and we don't have any records of the amount paid or any receipts
Q.1 So will the cost of acquisition (COA) be Nil? Or will there be any option to use the Fair market value as of 1 April 2001?

I understand LTCG can be reinvested in a residenial property under Sec 54F.

Q.2 Is there any option to avail Sec 54 EC by investing in specified bonds as per the allowed limit? Because I thought this section is only applicable cap gains on sale of land and building.

Q 3. Can my father in law pay tax on part of the LTCG and gift that amount to my wife under a gift deed? Will any tax be payable on this gift by my wife?

Asked 4 hours ago in Capital Gains Tax

Dear Querist,

For tenancy rights/pagdi rights, if no proof of original pagdi payment is available, the cost of acquisition may practically be taken as Nil. The option of taking FMV as on 01.04.2001 is generally not available for tenancy rights if the cost cannot be proved.

Section 54F may be claimed if the conditions are satisfied. Section 54EC is generally available only for transfer of land/building or both, so it may not apply to pure tenancy rights.

Your father-in-law may pay tax on the taxable LTCG and gift the balance amount to your wife. Gift from father to daughter is not taxable in her hands; keep a proper gift deed and bank trail.

For a more detailed review of your case, you may book a phone consultation.

CA Shubham Goyal

Shubham Goyal

CA, Delhi

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