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Earning by selling small carpet area - Tax implications

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Ram K

120 Points Posted on 26 September 2021

Dear Sir/Madam,

I might face following case. Our building is to be redeveloped and the builder is saying that for some technical reasons I might have to give up some carpet area in the new flat like say 15 Sq feet. Builder is ready to compensate the same by paying me at the market rate for that 15 Sq feet. This I guess shall also come in the agreement.

This amount is now earned by selling a small carpet area to the builder. Is this taxable and if yes how do we consider it for taxation? Under LTCG or income from other sources? If LTCG what should be then considered as cost of acquisition? The flat was originally bought by my parents sometime in I guess 1976 or so!

Thanks and regards.

Replies (3)

Quick Summary

This discussion explores the tax implications of selling a small carpet area back to a builder during a building redevelopment. The user is seeking clarity on whether the compensation received is taxable and how it should be classified for tax purposes, specifically if it falls under Long Term Capital Gains (LTCG) or income from other sources. Advice suggests calculating LTCG by indexing the cost of acquisition to the fair market value as of April 1, 2001.

CA Raj Doshi

Practising CA

5649 Points Posted on 26 September 2021

Apply the cost inflation index to the fair market value of the flat on 01.04.2001 to arrive at indexed purchase cost.

Sales value of 15 Sq.ft
Less : indexed cost of 15 Sq.ft
=LTCG

tax @ 20% + cess

Ram K

120 Points Posted on 26 September 2021

Thanks a lot Raj Sir.

srsubramanian

retired person

57 Points Posted on 16 October 2021

For short term capital gain or LTCG whether the property are to be registered property.
under sec 54 where does it say that the property should be registered property.