Income tax - query of capital gains tax

Tax queries 499 views 2 replies

Income tax – query

We are 4 brothers in the year 2000 bought an agriculture land of 5 Acres nearer to Hyderabad city and paid Rs. 5,00,000/- per acre and total consideration of Rs, 25,00,000/- and got registered by sub registrar at the valuation of Rs. 2,50,000/- per acre. And later we gave it to a person for lease for cultivation. After sometime the leased person occupied our land and troubling us by not paying lease rent and as well not vacating the land. In this scenario we approached a person who got good contacts with political and he himself wants to buy the land as it is for a consideration of per acre Rs. 1 crore and with a total consideration of Rs. 5 crores and he will settle the matter with the leased person. But now as per the sub registrar that land is not in agriculture status and their valuation is Rs, 4 Crore per acre and total official valuation is Rs. 20 crores in the status of residential category.

We entered into an Agreement of Sale with this buyer for Rs. 5 Crore for 5 Acres Land and later Sale Deed will be prepared for the same  Rs. 5 Crores.

In this regard how much income tax amount we will have to pay towards Capital gains tax? Kindly clarify.

Thanking you Sir, Venkat Rao Hyderabad

 
Replies (2)

If the Stamp duty value for 5 acres isadopted as 20 crores by the registrar, then your capital gains will be worked out treating 20 crores as sale value although you are getting only 5 crores as consideration. This looks funny since you will end up paying nearly 4.5 crores as tax on this capital gains. Your cost in 2000 will be 12.5 lakhs( 2.5*5). This will be indexed i.e.  12.5 lakhs *1085/389 = 34.87 lakhs. Net Capitla Gains will be 19.66 crores and capital gains tax will be 4.5 crores. You might as well not sell the property.  

Would like to know how the status changed from aggricultural land to residential one?


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