• Sale of land

My mother (age 76) has 2 resi. apartments and a piece of land in her name. She is planning to sell the land. This land was gifted to her in 1983 by her sister. My questions are
1. How do I calculate inflation indexed cost from 1983 since she didn't pay any acquisition cost
2. Since she has two resi. properties in her name, can she use the sale proceed to buy a third resi. apts to save the tax?
3. Also, can she use the proceeds to buy the 54EC bonds even if she has two resi. apts in her name?
Asked 2 years ago in Capital Gains Tax from Rajkot, Gujarat
Dear Sir,

With respect to your quarry please find below answer :

1. Cost of Acquisition shall be cost of purchase by your mother's sister. if same is not available you can find out through prevailing jantri rates at the time of purchase for calculation of index cost.

2. & 3  No the option of investing in third residential property shall not be available to her. She can only save capital gain by way of investing amount in NHAI & REC Bonds.

For further details please free to contact me.

Thanks & Regards
CA Vishrut Shah
Vishrut Rajesh Shah
CA, Ahmedabad
605 Answers
10 Consultations

5.0 on 5.0

Dear Sir,

1. You have to consider the Cost of Purchase by your aunt as the Cost of Acquisition and then charge Indexation accordingly.

2. No She cannot use the proceeds to buy a third residential property.

3. Yes. She can invest the proceeds for a period of 3 Years in bonds u/s 54EC.

Thanking You.

CA Rohit R Sharma
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

You need to take the value as on 01-04-1981 for indexation purpose.
No she cannot get benefit of investment.  for saving tax she can show that she has invested in construction or renovation of any one flat.
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 Consultations

5.0 on 5.0

1 The cost of the property will be with reference to the cost of the donor, i.e., the sister of your mother. As the property seems to be acquired by the donor before 1981, the market value as on 1st April 1981 will be considered as the cost of acquisition of the property. Thus if the cost of acquisition as on 1st April 1981 is Rs. 100, its cost will be Rs 1,081 during the current financial year. 

2 The sale proceeds on sale of residential apartments ( and not on the piece of land) can be used for the purpose of acquiring a new residential house to claim exemption u/s 54, subject to fulfillment of conditions specified therein. She will not be eligible to claim exemption u/s 54F as she already owns a residential house.

3 She can use the sale proceeds for investment in capital gains bonds upto Rs. 50 L, even if she has residential apartments in her name. The investment will be for a period of 3 years and thereafter, the amount can be used for any purpose as your mother thinks fit without any tax liability. 
B Vijaya Kumar
CA, Hyderabad
845 Answers
48 Consultations

5.0 on 5.0

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