23 May 2012
Hii, Mr.A purchase plot of labd with construcred byglow on it after some period he renovqted that bunglow Now he demolish that bunglow and make one residential building in which two flats he will keep gor himself and other he will sell in market .the constryction is done by himself only his cyrrent occupation is agent. So please advice me whtether the profit is taxable as capital gain or business profit? If capital gain then whether the cost of construction is considered as cost of improvement or not.
25 May 2012
This will be treated as a capital gain. However, the cost of construction in this case is not a cost of improvement as he demolished the old property and constructed two new flats. Therefore, it is the cost of acquisition and 50% of the total cost of acquisition is to be considered for the purpose of computing capital gain.
27 May 2012
Thanks. but he is not going to build only two flats he is going to build one residential building. And going to sale in market so in this case also the capital gain applicable?
30 May 2012
Please tell me in the new building how many flat he shall construct and out of that how many he shall keep for himself and how many he shall sell. Please also tell that whether the flats which shall be occupied by you are independent or not?
30 May 2012
Total 20 flats going to build, in that 2 flats i will keep for my self and remaining going to sell in the market. The flats which are occupied by me will in the same building may be on ground floor or terrace flat will be remained for myself. The both flat will be on my name only.
30 May 2012
You will get exemption for one flat only. The value of the remaining flat shall be chargeable to capital gain tax. If both your flats are on the same roof on interlinked then you will get exemption for both the flat.
CAclubindia
