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Query on long term capital gain

30 January 2015

HI,

I would like to know how can we save tax on Long term capial gain arising out of sale of anchestral property. The property is in the name of my father and his brother and both have equal share on the same.

My Queries

1. The Property was purchased before 1981 hence I dont know the Purchase value of the property for the purpose of indexing. How should I get the Purchase Price for the same?

2. Will the Capital gain arising from the Property be divided by Two?

3. How tax can be saved on sell of property? We are planning to Build a house. Can we build 3 flats in one building and avail tax exemption?

4. Can I Built a house & Invest in Bonds to avail exemption.

Awaiting for your suitable reply.

Thanking You

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4 Replies

Raphael (Chartered Accountant) (214 Points)
Replied 02 February 2015

Dear Friend,

1. You can take a reasonable estimate of the fair value of the land prevailing in that locality during 1981. Alternatively, you may approach the land registrars office to get details on suitable land deals occured during 1981 in your locality and use that value. The second method will be cumbersome.

2. Yes the capital gain will be divided on proportionate basis as there are 2 equal owners.

3. I did not understand this question completely. Could you please clarify whether you are planning to build a 3 storied apartment in the new land purchased?

4. Yes, you may invest in a residential apartment and bonds and claim combined exemption. Buying land alone will not make you eligible for exemption. You will have to construct residential apartment too.

Tyrone Sequeira (Service) (29 Points)
Replied 02 February 2015

Thanks you Raphael. With regards to Question 3. Yes, planning to build a 3 storied apartment on the other existing property. Can we avail full cost of construction of 3 storied building for exemption.?

GULRAJ AILANI (CA) (234 Points)
Replied 03 February 2015

According to my view from the case of Sushila M jaheveri , Rajesh Keshav Pillai & Rajnit vitthaldas

The Intention of law is that on the sale of one Property (long term capital asset)investment can be made in only one property (residential) and not in more than one property & cannot claim benefit under other section.
Thus from the sale of two properties investment can be made in only one Asset i.e either property or Bonds and not in both of the above