About capital gain

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Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 My question is about calculation of capital gain.
A site was purchased on 25-10-1989 for rs 162860-00 including registration and paper cost by 5 brothers, later on among the 5 brothers ,one of them had purchased the whole site by giving there part of share amount rs 200000-00 each for 4 brothers on 15-10-2011 by registered release deed and now, that means 2012 he is going to sale the property for 4000000-00 (register value)
so please tell how to calculate the capital gain and is there any way to avoid the tax..

Amol S Joglekar

Amol S Joglekar (Expert)
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24 September 2012 1/5th is long term and 4/5th is short term. For long term you can avail 54F or 54EC

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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24 September 2012 He earns both capital gain/loss i.e short term as well as long term for your easy understanding i am taking the following example with the values provided by you.
Assume on 25-10-1989 Mr.A,B,C,D&E jointly purchased 10 cents land for Rs.162860(including all expenses to purchase) and on 15-10-2011 Mr.C purchased all the land i.e 8 cents from other brothers for Rs.800000(4*200000)[assume all expenditure including) and on 24-9-2012 he sold all the land(i.e 10 cents) for rs.4000000.

Now case analysis:-

1) A,B,C,D & E each contribution is Rs.32572 for 2 cents of land on 25-10-1989.
2) On 15-10-2012 Mr A,B,D & E sold their land to Mr.C for Rs.200000 per 2 cents of land.
3) Mr.C sold total land of 10 cents on 24-9-2012 for Rs.4000000
4) So sale consideration for C is Rs.4000000 and cost of acquastion of such sale land is Rs.32572+800000=832572(i.e for 2 cents on 25-10-1989+ for 8 cents on 15-10-2011).
5) Period of holding for 2 cents on 25-10-1989 is 22 yrs 11 months(upto 24-9-2011) so it is liable for long term capital gain or loss so calculate the long-term capital gain or loss based on the indexation cost. And for 8 cents on 15-10-2011 is 11 months 10 days(24-9-2012) so it is liable for Short term capital gain/loss.
6) Sale consideration also equally for all the 10 cents i.e Rs.400000 per cent. So sale consideration for 2 cents which is long term asset is Rs.800000 and for 8 cents which short term asset is Rs.3200000.

Computation of Long term capital gain/loss:

Sale consideration 800000
Less:Indexation cost 148657
Long term Capital gain 651343

Note: indexation cost calculated based on the indexation value for F.Y.2011-12 because F.Y.2012-13 indexation value not available.

Computation of Short term Capital gain/loss:

Sale Consideration 3200000
Less: Cost of purchase 800000
Short term Gain 2400000

Assumption: Assumed jointly purchased property on 25-10-1989 by the 5 brothers contributed equally to purchase such property.

You can avoid tax by investing such gain/consideration according to the section 54,54B,54D,54EC,54F,54G & 54GA. Please refer these sections to get the eligibility to invest according to these sections and get exemption of capital gain tax.

OM SAI SRI SAI JAI JAI SAI

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Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 Sir,
Can we show that the part of share amount given for 4 brothers (ie: rs 200000 each = 800000)as development charges for the said site?

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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24 September 2012 No, its not possible.

OM SAI SRI SAI JAI JAI SAI

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