Capital gains query

Please go through the following question and provide the answer for it: 

 

Mr.A purchased a piece of land for Rs. 10,000 on 01/08/1972. During 1984-85, he constructed a Residential House Property on that land by incurring Rs. 50,000. Again during 1993-94, he incurred Rs. 80,000 for improvement of the property which is capital expenditure in nature. On 24/04/2002, Mr. A expired as a result of which Mr.B (son of Mr. A) has become the owner of the property by succession. During 2007-08, Mr. B incurred Rs. 100,000 for improvement of the property which is capital expenditure in nature. On 10/10/2011, Mr. B sold the property for Rs. 85 lakhs. The Market value of the property as on April 01, 1981 is Rs. 18,000.

 

Calculate the Capital gains on the transfer of property by Mr. B assuming that Rs. 2 lakhs is incurred as stamp duty, registration charges and brokerage.

 

Especially here I request you to give a detailed clarification regarding the amount to be taken as Cost of acquisition and Cost of improvement. And also specify as to from which year the indexation will be taken for the various amounts incurred by Mr. A and Mr. B.

Replies (2)

sale consideration 8500000

less:transfer cost 200000

less:indexed cost of acquisation 18000*cost index of 2011-12/ cost index year of transfer i .e,447

less:indexed cost of improvement: 

for his father : 50000*cost index of 2011-12/cost index of 1984-85 i.e,125

                 add:         80000*cost index of 2011-12/cost index of 1993-94 i.e,244

 for him    add:       100000*cosi index of 2011-12/cost index of 2007-08 i.e,551 AND THE REMAINING AMT IS LONG TERM CAPITAL GAIN

As the MV of the land on Apr81 is more than the land purchased in 1972, hence the MV of property of Rs18000 will be taken as the cost of acquisition by Mr B while calculating the Capital Gain for A.Y.2012-13 as it is more beneficial because the Cost of Acquisition is more.  the Cost of Acquisition of Land for Apr81 & the cost of residnetial property will be taken seperately.

Cost of Improvement will be taken as acutal expenditure incurred both by A&B i.e 80000+100000 which will be also required to be indexed.

the capital gain will be calculated as follows:

Sales consideration Received                    85,00,000

Less: Indexed Cost of Acq of land (CIF for 11-12/CIF for Apr81)

           Indexed cost of Acq for property constr(CIF for 11-12/CIF for93-94)

           Indexed Cost of Improvement for  93-94(CIF for 11-12/CIF for 93-94)

           Indexed Cost of Improvement for  07-08(CIF for 11-12/CIF for 07-18)

 

Balance will be LTCG/LTCL as the case maybe.

 

 

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