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Assets sold less than market value

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Tapas Samadder

538 Points Posted on 29 October 2024

Sir I sold house property less than market value (long term capital gains). How I pay income tax - I consider actual sales price or market value for calculation of profit. pls

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Quick Summary

If you've sold a property for less than its market value and are liable for long-term capital gains tax, you generally need to calculate the tax based on the property's fair market value (FMV), not the actual sale price. The FMV is considered the higher of the two figures. However, there can be exceptions, particularly if the property was sold to a relative or a specific individual as defined by the Income-tax Act, where the actual sale price might be used.

Rama chary Rachakonda

Master in Accounts & high court Advocate

9620 Points Posted on 29 October 2024

For calculating long-term capital gains tax, you need to consider the higher of the two values: the actual sale price or the market value of the property.

Long-term capital gains tax is calculated as follows: - Fair Market Value (FMV) - Cost of Acquisition (COA) = Long-term capital gains - FMV is the higher of the actual sale price or the market value of the property If you sold the property for less than the market value, you will still need to consider the market value for calculating the long-term capital gains tax.

For example: -

Actual sale price: ₹80 lakh - Market value: ₹1 crore - COA: ₹60 lakh In this case, the long-term capital gains would be: - FMV (�1 crore) - COA (�60 lakh) = ₹40 lakh

You will need to pay long-term capital gains tax on ₹40 lakh. However, if you sold the property to a relative or a specific person as per the Income-tax Act, 1961, you may need to consider the actual sale price for calculating the long-term capital gains tax.