- A Housing Society at Delhi purchased some land for construction of houses for its members. I, as a member of the Society, made payment of Rs. 2.25 lakh, to it for construction of houses, in instalments starting from 1985-86 to 1997-98 and took possession of the house in 1995. The house has since been sold in the year 2020-21. I, now want to invest a part of the LTCG in Bonds within 6 months of sale. The problem lies in working out the indexed cost of the house and LTCG.
- For working out the indexed cost of the house, now there are no Cost Inflation Indices for the years prior to 2001-02. The cost of acquisition of an asset acquired before 1 April 2001 is taken as higher of the cost of acquisition or Fair Market Value (FMV) as on 1st April 2001.
- There is no fixed formula to calculate FMV of such a property. One option is to look at circle rates. But in Delhi, circle rate concept was adopted in 2007. Tax authorities may find it difficult to rely on the valuation reports.
As the cost of acquisition of the house is very small, can I adopt the old cost inflation indices to arrive at the FMV in 2001 and then adopt the new indices to work out the present cost of FMV? On this basis, FMV in 2001and present indexed cost in 2020-21 work out to Rs. 450,000 and Rs. 13,75, 000 respectively.
Please suggest
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