Capital gains tax to be paid

After my Father’s death in 2006 I inherited my current property after reaching a court settlement with  my brother with half property going to my brother and half coming to me.
My share of property is 331 sq yards.

The current circle rate is 60000/ sq yards in my locality.
I am getting a price of 40000/ sq yards

My Property value as per Circle rate is: 19860000 
Actual Money I am getting is                 : 13240000 

My question are as follows:
1.	Capital Gains tax will be levied on Circle Rate or actual value I get.
2.	I will Purchase a flat of 70 lakhs from money I get. On this I have to pay State Govt Taxes @ 
        4.75% and Registry charges @5.1%. Will these be counted towards flat acquisition.
3.	Furnishing towards flat Like Woodwork, Modular Kitchen and Electrical accessories like Fans, 
        ACs will be counted towards Flat acquisition.
4.	Based on above Scenario how much Capital Gains tax I have to pay to Government.
Asked 1 year ago in Capital Gains Tax from Dehradun, Uttarakhand
The replies to your queries are as under:

1 Capital gains tax will be levied on the actual value you get. However, if the actual sale value is less than the rate at which the stamp duty is payable, the stamp duty value will be considered as  deemed consideration u/s 50C of the Income Tax Act. 

In your case, the stamp duty value is Rs. 198.6 Lakhs as against the actual sale value of Rs. 132.4 Lakhs. Hence,Rs. 198.6 L will be considered as the deemed consideration.

However, if you appeal before the Stamp duty authority or in any court of Law about the stamp duty, you can then take the actual sale consideration for the purpose of computation of long term capital gains.

2 The stamp duty paid on registration of the flat you are purchasing will also be added to the cost of acquisition.

3 Furniture which is part of your flat like wood work, electrical fittings  can be considered for the purpose of determining cost of acquisition. However, you cannot add the cost of sofas , modular kitchen etc as part of your cost.

4 Capital gains is the difference between the sale value and the cost of the asset after adjusting for indexation. In your case, it is not possible to determine the capital gains tax without knowing the cost of your property being sold now.

As the stakes are high in your case and involves issues relating to inheritance, it is advisable to take the advice of your CA before filing your return, as the documents and cash flows will have to be reviewed for proper assessment of your taxable income.
B Vijaya Kumar
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All the best.
B Vijaya Kumar
CA, Hyderabad
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Answer to your questions are as follows
1. for computation of capital gain sale proceeds shall be higher of stamp duty value (Circle rate) or actual value.
2. Stamp duty charges shall be part of cost of acquisition.
3.Cost of furnishing etc.. can be counted towards flat acquisition.
4. For computation of capital gain please provide date of acquisition of property and purchase price of property you are selling
Shyam Sunder Modani
CA, Hyderabad
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Again in the present case you have not given full info.

For calculation of Capital Gain Tax I need the following to arrive at indexation.

1. Total Land Cost as on 01-04-1981 as this is the base year for calculating indexation.
2. The construction was done in which year. When started and when completed ? Each year cost ? If you cannot arrive at the same then we can have an estimated basis of the same according to per sft rate or we need to get contractor certificate or valuation certificate for valuer.
3. This things are little bit complicated or lenghty but since you are selling the property at substantial value, we need to have a correct calculation and tax planning so that you will not have any complications in future from Tax Authorities.  
Shyam Sunder Modani
CA, Hyderabad
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Ok u get the value of total building along with land as on 01-04-1981 which is base year for calculation from registration office
Shyam Sunder Modani
CA, Hyderabad
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The capital gain tax will be computed with reference to market value as per stamp duty valuation or actual value which ever is higher. In this case I presume circle rate to be value under stamp duty value and it shall be considered for computing capital gains.

The purchase consideration of Rs 70 lakhs and stamp duty and registration expenses incurred will be considered for deductdion under section 54 as exemption.t 

The cost of interior which is a permanent fixture intended for better user of property may be considered for deduction under section 54 as exemption.

The capital gains tax can be computed when following information is availble
cost of acquisition and year of acquisition 
cost of improvement and year of improvement
The above costs will have to be indexed as per the index given in the Income Tax Act and such value deducted from full value of sale consideraation will determine amount of Capital Gain liable to income tax.
If the property has been acquired prior to 01-04-1981 then value as on 01-04-1981 can be adopted for indexation and deduction from sale consideration for computing capital gains.

Vijay N. Kale
CA, Hyderabad
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U can get the same from registration office where the property is situated, u need to give the property description along with the builtup area and they will provide u with the details of cost
Shyam Sunder Modani
CA, Hyderabad
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U can give the details to the registration office about the structure and construction. They will give u the cost as per their rates in force.
Shyam Sunder Modani
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You can get valuation of the house done by a valuation expert, though it may be difficult to know the cost of construction during the 1981. One approximate way of doing it is to arrive at the present valuation and work back by using the index. For example, if the present value of the house is, say, Rs. 10,24,000/- and the index for the financial year is 2014-15 is 1024, then the estimated value of the house as on 1/4/81 may be taken as  Rs. 1,00,000/-. 
The index for FY 2015-16 is not yet notified.
B Vijaya Kumar
CA, Hyderabad
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Kindly obtain a certificate from Sub Registrar Office about the value as on 01-04-1981, and supply this to a income tax registered valuer and he will determine value of building and house as on 01-04-1981  and said value of house 
as determined by valuer can be indexed to current index which is more than 1000 and same can be claimed as indexed cost of acquisition from full value of sale consideration to compute capital gains income on proposed sale of property.
Vijay N. Kale
CA, Hyderabad
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Valuers registered under income tax are the professional valuer and their valuation is acceptable under the provisions of Income Tax Act.
Vijay N. Kale
CA, Hyderabad
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Hi

You can send us the details on our mail id modani005@gmail.com or u can call at 9849265559 for further details and we shall prepare ur tax returns and advise u regarding tax planning 
Shyam Sunder Modani
CA, Hyderabad
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If the cost of acquisition i e purchase price of the property is more than value as on 01-04-1981, then it would be preferable to adopt purchase price for computation of capital gains. 
Vijay N. Kale
CA, Hyderabad
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Circle rate only will be considered for determining the market value as on 01-04-1981
B Vijaya Kumar
CA, Hyderabad
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