Does plot cost and construction cost sum up for acquisition cost

Does plot cost and construction cost sum up for acquisition cost

Bought a plot in 1985 for Rs 40,000. In 1995 we constructed a two floor house for Rs 14,00,000.
In march 2016, we sold the entire plot with house for 68 lakhs. Now for calculating capital tax,
1. Does acquisition cost will be the sum of the indexed amount of both plot price and construction cost and capital gain will be arrived by subtracting the sum amount from 68 lakhs selling cost?
2. Is it mandatory to calculate capital gain tax separately for plot buying/plot selling cost and separately for construction cost? But my sale deed just mentions 68 lakhs on whole for the plot with house.
3. If done separately, does capital gain in selling plot will be equalized with the indexed loss that happened due to construction in the same plot ? Or need to pay huge tax for selling plot and face loss for selling the constructed house.
3. Does maintenance cost like painting it once in 4 yrs be included as part of acquisition cost?
4. Not having bills for any of these construction or maintenance expenses. Does evaluation officer takes care of doing the needful ?

Asked 8 years ago in Capital Gains Tax

Calculate the indexed cost of acquisition of the land and building separately. The sum of the two indexed cost of acquisition would be reduced from the sale consideration, to arrive at the capital gain.

Maintenance cost like Painting will not be considered for determining the amount of capital gain.

The onus is on you to substantiate the cost of construction. If you don't have the necessary bills, check if you could substantiate it with withdrawals from bank accounts or issue of cheques in this regard.

Regards

Keerthiga Padmanabhan

M.Com., CA, LLB

Keerthiga Padmanabhan

CA, Greater Mumbai

784 Answers

27 Consultations

Talk to Keerthiga Padmanabhan

We were informed by our auditor that there will be a assesing officer who will evaluate the building and come up with building indexed cost which will be used to arrive at the indexed cost of acquisition since the building was constructed by my dad in 1995 for which its not possible to arrive at bills or bank statements(mostly cash txns).
Any specific reason why painting the house once in four or five years is not considered under maintenance cost?

Asked 8 years ago

Hello sir ,

A.1) Exactly, your total cost will be the sum of Indexed plot cost & Indexed Construction cost, which come to

Rs. 59,43,328/-. and your capital comes to Rs.856672. (6800000-5943328)

A.2) No, It is not mandatory to calculate separate Capital gain tax for plot & Building.

A.3) Not applicable.

A.4) Expenses incurred on repairs or renovations of a Self occupied property do not qualify for tax benefits. We are presuming that you have not taken a loan for the renovation. However, if you avail a loan for renovations, you can claim maximum deduction up to Rs.30,000 per fiscal towards interest.

A.5) Well, I'm not sure about this because it is all up to assessing officer .

For any clarification feel free to contact us at ca.skagarwal@gmail.com

Call at: 07503638500

Thanks Regards

CA SK Agarwal

7503638500

Shiv Kumar Agarwal

CA, Delhi

489 Answers

74 Consultations

Talk to Shiv Kumar Agarwal

1. Yes you are right. It will be sum of indexation of Cost of Acquisition of Plot and indexed cost of improvement i.e. construction on the Plot. That will be subtracted from the Selling Price to arrive at capital gains.

2. It should be calculated combined and not individually.

3. No painting is not treated as cost of improvement. But if you have done some repairs or changes to the structure of the house then yes that will be treated as cost of improvement.

4. Better that you get the valuation done from govt./ income tax approved valuer.

Shyam Sunder Modani

CA, Hyderabad

1409 Answers

164 Consultations

Talk to Shyam Sunder Modani

Dear Sir

1. Your total cost will be the sum of Indexed plot cost & Indexed Construction cost, which would be INR 59,43,328.

2. No, It's not mandatory to calculate separate Capital gain tax for plot & Building.

3. NA

4. No

5. You should have some basis to justify the construction cost. Photos of the property before and after construction are also accepted sometimes.

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

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar

CA, Mumbai

3576 Answers

183 Consultations

Talk to Abhishek Dugar

Reference to the Department Valuation Officer (DVO) is possible, in case you case gets picked up for assessment.

With regard to painting of house, cost of improvement will be included in the cost of acquisition. Cost of improvement means a capital expense incurred for making an addition or alteration to the property. Painting does not add or alter the structure of the property. It is incurred only for the maintenance of the property.

Trust this suffice.

Regards

Keerthiga Padmanabhan

M.Com., CA, LLB

Keerthiga Padmanabhan

CA, Greater Mumbai

784 Answers

27 Consultations

Talk to Keerthiga Padmanabhan

Hello Sir,

1. Yes, cost of acquisition will be the indexed cost of land and construction taken together.

2. No, the combined cost of acquisition will be considered to arrive at Capital Gain.

3. Not done separately.

4. Nop, painting cost is not considered.

5. Bills are mandatory to be maintained, if not maintained then you may prove the same by withdrawals from bank account etc.

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

2104 Answers

95 Consultations

Talk to Rohit R Sharma

Hi All,

Thanks for your responses on the above question. Consulted an auditor and these are the options left with my scenario.

Based on index calculations my capital gains comes to around Rs. 21 lakhs. Seems like i have to pay around 3.5 lakhs as tax after deducting TDS paid during the sale deed.

Questions:
1. This is the only house i had and i have sold it. 11 months back, i started constructing a house on a plot bought by my dad and for construction i took a loan of 30 lakhs. After EMI payments till now, 26 lakhs principal yet to be paid currently. Other than this 30 lakhs i have also spend 15L from my savings account in the past 6 months for the house construction(this expenses happened one or two months before March 15, 2017 - day when i sold the old house). Anyway i can reduce the capital gain of my old house from this new house construction cost?
2. Yet i will be spending some 8 lakhs on the new house construction. Will this 8 lakh can be deducted wholly from capital gain 21 lakhs and for remaining amount i can pay 20% tax or i should deduct this 8 lakh proportionally with the sale deed amount and then reduce that relative amount in my capital gain?

Thanks in advance.

Asked 8 years ago

I think this query is specifically addressed to other experts.

B Vijaya Kumar

CA, Hyderabad

1029 Answers

124 Consultations

Talk to B Vijaya Kumar

Hello Sir,

You could have made all the investments before the due date of filing of return for the F.Y. 2015-16. In your case, the period has already lapsed, so there is hardly anything you can do in order to save up on taxes.

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

2104 Answers

95 Consultations

Talk to Rohit R Sharma

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