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Capital gain in property

Bhavna Rathod (Accountant) (35 Points)

30 July 2015

Dear all

I have purchased one plot in 2008 at Rs.137300/- , I have taken housing loan on it of Rs.15,00,000 in 2012, Now the Construction is completed in last month & i sell it in 40 lacs, I wnat to know the calculation of Capital Gain.

Thanks

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Z ( ) (2960 Points)
Replied 30 July 2015

For the purpose of computing capital gain , you will have to bifurcate the capital gain on land and the capital gain on building , since they both have different period of holding

For land , there will be a long term capital gain and on building there shall be a short term capital gain.

Take the stamp duty value of land at the time of sale as the full value consideration , in light of S. 50C and 50D . The remaining balance is the full value of consideration of the building.

[There are 6-7 high Court judgement suggesting this treatment, one being C.R. Subramanian]

Compute the gain as per provision of S.48

Indexation for the purpose of land would be arrived by using Cost inflation index

If Financial year is 2007-08 ; CII is 551

If Financial year is 2008-09 ; CII is 582

48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto:

Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :

Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted:

Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government :

Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section :

Provided also that no deduction shall be allowed in computing the income chargeable under the head "Capital gains" in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.

Explanation.—For the purposes of this section,—

(i) "foreign currency" and "Indian currency" shall have the meanings respectively assigned to them in section 2 of 95[the Foreign Exchange Management Act, 1999 (42 of 1999)];

(ii) the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at the rate of exchange prescribed in this behalf;

(iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;

(iv) "indexed cost of any improvement" means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;

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