Computation of indexed cost of a plot of land

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Kapil Tiwari

Senior Export Executive

449 Points Joined May 2012

My aunt had a vacant plot of land measuring 590.69 square yards. According to the valuation report dated 13th March,1981, the value of these 590.69 square yards of land was Rs.5,03,000/-. Vide Sale Agreement dated 25th July,2012, 267.27 square yards from the same plot of land was sold for a total consideration of Rs.1,10,36,000/-.My queries are:

1)What should be considered the actual value(without indexation)of 267.27 square yards as on 1/4/1981(when CII is 100)?

2)What should be considered the indexed cost of these 267.27 square yards of land if sold on 25/7/2012?

Replies (3)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

If the asset is acquired before Apr81 then the fair value of the land on or after Apr81 or the cost of the asset before Apr81 should be considered as the Cost of Acquisiton.

Once this cost is being determined then the same indexed by multiplying it with th index for F.Y. 20120-13 & dividing it by 100. Then this indexed cost shall be deducted from the sale consideration of land and the balance amount would be a LTCG.

Sumit Grover

Chartered Accountant

3652 Points Joined September 2008

Assuming that the FMV(as determined by the valuation report) is greater than the actual cost of land:

1) without indexation-

503,000X 267.27

590.69

2) WITH INDEXATION:

503,000X 267.27 X 852

590.69 100

CA Harsh Lunia

Audit

81 Points Joined August 2012

In my view, considering that the whole plot was valued on a uniform basis i.e. that the plot sold had the same benefits attached to it as was with the part that is still in possession, the cost of acquisition of the plot sold can be taken proportionately.

Hence cost of plot sold will be Rs 227593 on 01.04.1981

On the basis of above conclusion, its indexed cost will be Rs 1939092 (227593/100*852)

Long term capital gain = 9096908