Capital gain

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Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2012 For Computing Capital Gain - Ancestor Property.
Property acquired by previous owner in 1964 (by way of partition, 1981-FM Value Rs.5000). The ancestor died in 1996. Property automatically transferred to his son in 1996. The property sold on May 2011, for Rs. 38 lcs. He invested in a residential house on September 2010, value of Rs.4,80,000.

1. What will be the cost of acquisition?
2. Year From Which indexation apply?
3. Can the residential house purchased before sale be claimed?
4.Net capital gain

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

09 July 2012 1. Cost of acquisition shall be the fair market value as on 1.4.1981.

2. Indexation will apply for FY 1981-82, i.e., 100.

3. Residential house, if purchased within 1 year before the date of sale, is eligible for exemption.

Since the new house has been purchased within the period of one year, it ie eligible for exemption

4. Net capital gain shall be computed as under:

Sale Consideration 38,00,000
Less: Expenses on transfer NIL
Less: Indexed cost of acquisition 5,000*785/100 = 39,250
Less: Indxed cost of improvement
CAPITAL GAIN 37,60,750
Less: Exemption u/s 54 4,80,000
Net Capital Gain 32,80,750

The above answer is based on the assumption that the asset sold is a residential house property.

If the asset is only land, then exemption will be available u/s 54F. The amount of exemption shall be Rs. 4,75,042 (4,80,000/38,00,000 * 37,60,750) and accordingly capital gain shall be Rs. 32,85,708

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