A's land FMV and cost is Rs.5000. B's land cost and FMV is Rs. 10000. A and B exchanged their lands. How is the tax computed for A in India? is it considered as gift or capital gain? will the treatment change if cost and FMV are different?
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Income tax - Land exchanged for Land
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Quick Summary
Both will be taxed on the basis of higher FMV, under head Capital Gain.
Dont do such things u will be taxed higer in such case transfer of property without adequate consideration
An exchange is a transfer for both:
• Sec 2(47) "transfer" includes exchange. Each party has transferred their land and received the other's land as consideration.
• A's capital gain: consideration = FMV of land received (Rs 10,000), subject to Sec 50C (stamp duty value of A's land, if higher). Cost Rs 5,000, so gain Rs 5,000 (LTCG or STCG by holding).
• B's capital gain: consideration = FMV of land received (Rs 5,000), or SDV of B's land under 50C. Cost Rs 10,000, so loss Rs 5,000.
• Cost of the new land for each = FMV at exchange (the consideration given). Sec 56(2)(x) applies if the SDV of land received exceeds what was given by more than 10%.
• Stamp duty is payable on the exchange deed (as on conveyance).
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