Capital Gains Tax on Purchased at higher than Stamp Duty Value

I purchased a Flat in 27 lakhs in January 2007( Real Estate Boom) with a Bank Loan of 23 lakhs but registered it at the Circle rate of 7 Lakhs.

No I am selling it in 24 lakhs (Hate the Real Estate in Hyderabad) but I have to do the registration at 24 Lakh because it is an old flat and Bank of my buyer is now allowing registration at Circle rate.

In this case, I am actually selling the Flat at a Loss but the Registration Price shows that I am selling it at a Profit. Do I need to pay Capital Gain Tax in my case?
Asked 2 months ago in Capital Gains Tax from Hyderabad, Telangana
Dear Sir,

As per Section 50 C of the Income-tax Act, the Sale Consideration should be minimum of the value adopted for Stamp duty purposes.

If the same is registered for value less than the value adopted for stampduty purposes, the stamp duty value will be taken as the Sale Consideration.

In veiw of the above, you have two choices :-

1) Register the property as per Stamp Duty valuation, and pay Capital Gans tax tax on the transaction after considering the Indexation benefits. The  Long Term Capital gains tax will be approximately 15 lakhs. You need to provide further details for arriving at the exact amount of Capital Gain taxes.

2) You can dispute the value adopted by Stamp duty authority and the value finally accepted by the stamp duty authority will be final. Then you can recalculate the capital gain and pay the same. If you do not dispute the valuation adopted by the Stamp duty authority, then the value as determined by the Valuation officer , referred by the Income tax officer.

Thanks & regards

- CA B S Sridhar
B S Sridhar
CA, Chennai
35 Answers
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  Talk to B S Sridhar
Hi,
if you have got your registration done at Rs 7L  and paid the stamp duty only for Rs 7 l it means you have converted (unknowingly) rest of the amount into black money for seller. as he might have shown selling price  at Rs 7 lakhs. 
the amount you have paid in cash can not be included as cost of purchase as registration is done at lower rate.
you can show the cost of purchase for which you have proof of documents like cheque number , DD
but you may land up in paying the stamp duty for the actual amount of purchased price i.e for RS 27 L.
Vishakha Agarwal
CA, Bangalore
208 Answers
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  Talk to Vishakha Agarwal
your capital gain would be
selling price - indexed cost price
24l- (7L*1125/519)
= Rs 8,82,659
you can also claim any cost of improvement on the flat incurred by you plus stamp duty paid plus registration charges on indexed basis.
and can also claim selling expense.
i have calculated the capital gain amount only on basis of the information given above.
you are required to invest only the capital gain amount earned in NHAI / REC bonds. interest earned on investment is taxable.

if you are planning to purchase or construct the house in near future then you can deposit the amount the CGAS.
for a period of three years if not utilised by that time , it will become taxable.
if section 54 is applicable in your case then also you can save the tax,
Vishakha Agarwal
CA, Bangalore
208 Answers
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  Talk to Vishakha Agarwal
Hello Sir,

Firstly I did not understand when your agreement was registered at the Circle rate how could you obtain a Housing Loan for 23 Lacs.

Assuming you got one, still your Cost of Acquisition shall be Rs.7 Lacs which will be indexed till the year of Sale.

In order to save up on Taxes you can Invest the Capital gains i.e Sale proceeds less Indexed Cost of Acquisition into NHAI or REC Bonds.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
Rohit R Sharma
CA, Mumbai
706 Answers
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  Talk to Rohit R Sharma
Dear sir,

Your cost of acquisition would be 7 lacs.


Please feel free to call/revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA, CS, B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
755 Answers
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Sir we think your query is already answered
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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  Talk to Shyam Sunder Modani

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