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Tax :compensation recvd against acquisition of land/property

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vivek

31 Points Joined July 2013

land and house property in the name of my mother (land purchaeed in 1990s and house constructed by father by his retirement savings in 1994) is going to be acqired by govt for railway expansion project.She is a housewife and hasn't filed income tax return.What will be the tax treatment for compensation received against the acquisition by govt.

how will the cost of acquisition calculated for the difference amount (compensation - cost of acquisition)

Replies (1)

Varun Jain

varunjain9322@gmail.com

56 Points Joined November 2014

If the property is compulsory acquired on or after 1st April, 2017, then Cost of Acquisition would be
1) Fair Market value as on 2001, or
2) Purchase prize (Purchase or Land + Cost of construction of house + Cost of any further Improvements done before April 2001,
Which ever is higher

And Cost of improvement would be, if any improvement is carried out,

The above determined value would be indexed till the year of transfer (i. e. Year in which asset was acquired) , since capital asset (Property) is long term in nature.

Capital amount would be chargeable to tax in the year in which you receive the initial compensation and not in the year of transfer.