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Capital gain (cost of indexation)

01 April 2017

The case is of Capital gain and cost of indexation, if the payment of purchasing the property is being made in installment , then in that case can we take the indexation pricing in one time , i.e the indexation of year of allotment . Please provide me the opinion in aforesaid regard.

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10 Replies

Studentsca (CA Practice ) (3577 Points)
Replied 01 April 2017

Has the property been sold befoe or after possession??

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Peter (Article Assistant) (118 Points)
Replied 01 April 2017

1. Indexation benefit is applicable to a long term capital asset.
2. For an asset to be a long term asset the peroid of holding should be more than 36 months.
3. Peroid of holding commences fron the date where substantial risk and reward of holding the asset passes to the owner of the asset. Payment is not the criteria. It can be made in installments.
3. Hence first check peroid of holding. If it is more than 36 months you can claim indexation on the installments made irrespective of the fact that peroid of installment s are less than 36 months.
4. Do note the indexation figures change based on year of payment.

Sanaullah sabri (article) (55 Points)
Replied 01 April 2017

The property has been sold after possession after holding it for more than 36 months,

Studentsca (CA Practice ) (3577 Points)
Replied 01 April 2017

@ PETER-How is the period of holding calculated in case of a property which when purchased was under construction??

Sanaullah sabri (article) (55 Points)
Replied 01 April 2017

The property here was not under construction, it was self occupied residential house.

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Studentsca (CA Practice ) (3577 Points)
Replied 01 April 2017

In that case the indexation would be available on the basis of year of payment.

Sanaullah sabri (article) (55 Points)
Replied 01 April 2017

so we can't take the indexation of year of purchase on whole accumulated amount.

Sanaullah sabri (article) (55 Points)
Replied 01 April 2017

I buy your point here, but i also want to know here that if the case is of seller, and he is getting payment of sale consideration in installment then what would be your mean to calculate the capital gain?, One time ?? right??, then why can't we take the COA based on the indexation of year of allotment.

Studentsca (CA Practice ) (3577 Points)
Replied 01 April 2017

Look you are using the word allotment which is usually in case of under construction property hence the confusion What you mean to say is you purchase a ready made house for self and now you are selling it right. In this case you have to consider holding period from the date of possession. Indexation on entire purchase price would be available for that year.

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