Capital Gain on Change in DLC Rate

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This discussion addresses capital gains tax on land sold after its value significantly increased due to inclusion in municipal limits and a revised DLC rate. The core question is whether the difference between the purchase cost and the new DLC rate can be considered a 'cost of improvement'. The consensus is that 'cost of improvement' typically refers to actual expenditures on the land (like fencing or levelling), not just an increase in market or DLC rates. For maximum benefit, using the DLC rate or market value from 2001 as the cost of acquisition is suggested.

VIPIN GUPTA

VIPIN GUPTA (Querist)
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20 October 2021 Sir, One of our client has purchased land in the year 1976 and sold the same in the year 2013-14. The Cost of Purchase was Rs 5000/- per bigha. In the year 2010-11 the land came into the municipal limit of Nagar palika and due to rapid industrialization the DLC rate of Land came to Rs 7000000/- in the year 2011. Now in the year 2013-14 the assessee sold the land @ Rs 9500000/- per bigha. My Query is can we take the difference in cost of purchase and DLC rate as on 2011 Rs 7000000-5000 = Rs 6905000 as cost of improvement. or any other way we can increase the cost. since our case is unde scrutiny for the A/y 2014-15 and we have not filed the Income Tax return for that year

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 October 2021 NO.
Take DLC rate as on 2001 or theMarket value evaluated by a registered valuation officer as on 2001 as the COI for maximum benefit.

VIPIN GUPTA

VIPIN GUPTA (Querist)
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02 November 2021 Sir Dlc rate got revised in 2011 can we take difference in rate as on 2001 and 2011 as cost of improvement. As there is huge difference

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 November 2021 Cost of improvement is considered for the amount spent by you additionally over the asset; not over increase in market or DLC rate.
You can add any sort of expenditures like compound wall, security cost, mud filling, leveling etc etc. under cost of improvement in land.

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