How to calculate the LTCG in this case

Tax queries 1027 views 5 replies

D

Sr. GM

25 Points Posted on 31 May 2010

Hello all,

Please help me out in the bellow scenario:

We (myself, my brother and my mom) inherited the residential house after my father passed away in 2008.

My dad incured the following cost towards this property:

Purchase of Land (1972)----Rs. 5500/

Cost of building ground floor (1980)---Rs. 85000/

Cost of building 1st floor (1999)---Rs 3,00,000/

Other improvements(garage etc.) 2004- Rs. 80,000/

We are planning it sell it now as it's difficult to maintain it in my native, we all placed in Metros

Offer price is Rs. 22,00,000/

What would be the LTCG implications on this scenario?

How can the Tax be minimized?

Thanks in advance

Replies (5)

M.M.SURANA

Director -Taxation

532 Points Posted on 31 May 2010

Mr. D

In my opinion , In normal course, U hav to obtain legal heir certificate , all of u become co-owners of property and U can enjoy 1/3 share of each. If U want to go more legally U can go for family settlement deed. If will has not been prepared U can adopt cost price of property or fair market value as on 1.4.1981 for indexation.

Surana, Chennai

9952967237

CA Kanwaljeet

Chartered Accountant

88 Points Posted on 02 June 2010

first of all u have to calculate of value of house as on 01.04.1981 and after that

sale consideration : 2200000

less:- Indexation cost of improvement

less:- Indexation of cost of purchase

LTCG

less:- u can claim exemption u/s 54 for purchasing new house

kantijain

Chartered Accountant in Practice

385 Points Posted on 02 June 2010

Dear D,

I agree with views of Mr.Surana & kamal, however pls be careful while indexing it as department is of the view that indexation is from the year when assessee possess the properties, but few authors/experts have interpreted that even in case of inheritance/gift the indexation can be claimed from the year in which property was so possessed by original owner.

Suggest u to take provide all the details to an expert or professional CA & handle the transactions.

Regards

Kanti Jain

D

Sr. GM

25 Points Posted on 02 June 2010

Thanks to Mr. Surana, Kamal and Kanti Bhai,

Firstly, the process of legal heir certificate has been done. There was no will.

Secondly, as of 1.4 1981, the house had only ground floor. All other improvements like staircase, 1st floor, boundry wall, garage has been constructed later on as I have given the timeline.

So can I calculate the indexation in this way?

A) cost of land and building of ground floor (Rs.85500) X 632%= Rs.540360

B)1st floor construction cost Rs. 300000 X 281% =Rs. 843000

C) Garage and other improvements cost Rs.80000 X 152% = Rs. 121600

Total cost after indexation Rs. 1504960

Proceed from sale Rs.22,00,000

Profit Rs.695040

Tax on profit Rs.139008

Please evaluate my computing and guide.

M.M.SURANA

Director -Taxation

532 Points Posted on 03 June 2010

Dear sir

I feel your calculation to be corrected to some extent As on 1.4.81 should be 5500+85000=90500*632.( 2). Assumimg F.Y. 1999-2000 it should be 300000*632/389 and (3) F.Y. 2004-05 80000*632/480 Hence Total Indexation. 1,164,697 and Total Profit is 1,035,303 and is 207,060/-

If I wrong correct me.