Capital gains tax

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Pal (Querist)

22 January 2021 I inherited residential property in 2016 from my father that he built in 1980. Cost of acquisition of Land as of April 01,2001 is Rs.6.70Lakhs. Cost of construction of building as of April 01,2001 is Rs.13Lakhs as per property valuation report. Now in 2021 I want to demolish the current building and reconstruct 4 floors using my own funds. Out of these I'll sell 3 floors in 2022 and retain 1floor. Stamp duty value of sales consideration for each floor would be Rs.63Lakhs therefore total sales consideration would be Rs.1.86crores. Cost of construction for new 4 floors would be Rs.1.20crores. Current stamp duty value of Land is Rs.90Lakhs.
What would be my capital gain tax liability when I sell 3 floors? Is it going to be long term or short term capital gains?
Am I allowed to claim exemption on both land and current building indexed value, also cost of improvement by constructing a new building?
How can I bifurcate land and building cost in sale deed and how can claim LTCG on undivided land share and STCG on building construction share?

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)

22 January 2021 1. IT will be long term capital Gain 2.You can claim exemption of both cost of land and improvement.. 3. Building Construction is improvement in old land only so same is also deducted while calculating LTCG.

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