Doubts Regarding Capital Gains Tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2010 Hi,

We (me and my father) sold piece of our ancestral property in Lucknow on 1st December 2009. The type of land was "Commercial" and the person to whom the property was sold had been occupying that piece for last 20 years or more. As per the Sale Deed, these are the details:

Sale Consideration : x
Market Value : y
Stamp Duty Paid : z -- This is on market price.

Since it an ancestral property I understand that valuation of the land on April 1st, 1981 would be the actual cost of land. The confusion here is about the selling price. The stamp duty was paid on Market Value but the money we got as per the Sale Deed was x. Please note than x is lesser than y in this case. The property was sold lesses than market price because the tenant was holding the property for last 20+ years or so.

1)For calculation of Capital Gains Tax which amount will be taken into consideration – selling price or market price ?
2)What is the time frame to purchase Government Bonds after the sale ?
3)Even if I purchase the bonds do I need to file for tax showing that I have invested the money in bonds ?

Let me know if you need any more info from my side.

Thanks in advance.

Regards,
Saurabh

Querist : Anonymous

Querist : Anonymous (Querist)

29 March 2010 Would be great if someone can reply to the query above.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2024 Based on your situation regarding the sale of ancestral property and the questions you have about capital gains tax, here are the answers:

1. **Calculation of Capital Gains Tax:**
- For the purpose of calculating capital gains tax, the **selling price** (x) mentioned in the Sale Deed will be considered as the full value of consideration. This is the amount actually received by you and your father from the buyer.
- The **market value** (y) and the **stamp duty value** (z) are relevant for determining the deemed full value of consideration under certain circumstances, but typically, the actual selling price is used unless it is underreported or there are specific provisions in the Income Tax Act that adjust the consideration.

2. **Time Frame to Purchase Government Bonds:**
- Under Section 54EC of the Income Tax Act, to claim exemption from capital gains tax, you have to invest the capital gains in specified bonds (usually issued by NHAI or REC) within **6 months** from the date of transfer of the property. This means you need to invest in these bonds within 6 months from 1st December 2009.

3. **Procedure for Investment in Bonds:**
- Yes, if you choose to claim exemption under Section 54EC by investing in specified bonds, you need to provide details of this investment when filing your income tax return for the relevant assessment year (AY). This is usually done by declaring the investment in the tax return form, and if required, providing documentary proof of the investment such as bond certificates or proof of purchase.

To summarize:
- Use the actual selling price (x) for calculating capital gains tax.
- You have 6 months from the date of property sale (1st December 2009) to invest in specified bonds under Section 54EC.
- Yes, you need to declare the investment in bonds in your income tax return to claim exemption from capital gains tax.

It's recommended to consult with a tax advisor or chartered accountant for specific guidance tailored to your situation and to ensure compliance with tax laws. They can also assist you in properly documenting the investment in bonds and filing your tax returns correctly.

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