Stcg or ltcg ?

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Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2016 Plot Purchase in 2011 and constructed house in F Y 2015 and now sold in 2016 the same it is Short Term Capital Assets or Long Term Capital Assets..?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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12 February 2016 Plot is long term asset. Building is short term asset.

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2016 Thanks for reply but how to compute ltcg and stcg ?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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15 February 2016 The cost of land without development and construction costs will be the cost of acquisition for the land. All other costs pertain to the building. However, if a composite sale deed is made for the sale of the property, as is usually done - building with land appertuant thereto, then the entire consideration is short term capital gains.

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2016 Thanks....Mr..Ramaswamy...We consider it is LTCG as u firstly saying..Cost of Icqu and Cost of Improvement..but Sale deed is made with Residential House...so we going right way... ?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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16 February 2016 1. Capital gain for land and building has to be computed separately, land being long term and building being short term.

2. My observations are based on Madras high court decision in the case of
CIT Vs. Dr. D.L. Ramachandra Rao [1999] 236 ITR 51.

Querist : Anonymous

Querist : Anonymous (Querist)

17 February 2016 Thanks to Mr Chackrapani for reply and Cited the Case law....But Mr. Chackrapani your mentioned Case law of 1999 and I think after that there may be amendment and or any other case law which override the your cited case law...?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Great question! Let me break down the treatment of capital gains on sale of land with construction, and how STCG and LTCG apply:

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### Key points:

1. **Holding period for Land:**

* Land held for **more than 36 months** (3 years) is considered a **Long Term Capital Asset**.
* Since your plot was purchased in 2011 and sold in 2016, the land qualifies as **LTCG**.

2. **Holding period for Building (Construction):**

* Construction was completed in FY 2015, and sale took place in 2016, so holding period for building is **less than 3 years**.
* Building is treated as **Short Term Capital Asset**.

3. **Composite Sale Deed:**

* When the sale deed **combines land and building**, there is some practical difficulty.
* According to **Madras HC ruling in CIT vs. D.L. Ramachandra Rao (1999)**, capital gains should be computed **separately** for land and building.
* You must **apportion the sale consideration** between land and building (generally based on stamp duty or fair market value ratio).

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### How to compute Capital Gains:

| Step | Explanation |
| ---------- | ----------------------------------------------------------------------------------------------------------------------------------- |
| **Step 1** | Separate cost and sale consideration of land and building based on market value or stamp duty rates. |
| **Step 2** | Compute LTCG on land as: Sale consideration for land – Indexed Cost of Acquisition (purchase price of land, indexed for inflation). |
| **Step 3** | Compute STCG on building as: Sale consideration for building – Cost of Construction (since holding 3 years | LTCG @ 20% (with indexation) |
| Building | < 3 years | STCG as per slab rate (no indexation) |

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If you want, I can help you prepare a sample working for computing LTCG and STCG for this scenario.

Would that help?

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