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Indexed cost on acquisition

07 March 2014

Hello,

My father purchased a property of Rs 1,00,000 on 15/04/1986. As on 01/01/2013, he gifted such property to me (FMV as on 01/01/13 is Rs.30,00,000). Now I want to sell the said property as on today i.e. 07/03/2014 worth Rs. 35,00,000.

What will be the tax implications? Is this STCG or LTCG? Please show me the amount of cost of acquisition?

Thanking You

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16 Replies

Prashant Kini (Article Assistant) (154 Points)
Replied 07 March 2014

Gain on sale of above property is long term capital gain. Indexed cost of acquisition is Rs. 6,70,714 (1,00,000*939/140). LTCG is Rs.28,29,286.00

Mihir (Wealth Manager) (5293 Points)
Replied 07 March 2014

Sale consideration = Rs. 35,00,000/-

Less

Indexed cost of acquisition = Rs. 670,714/- (100,000 x 939/140)

LTCG = Rs. 28,29,286/-

Arpit Pachisia (CA) (734 Points)
Replied 07 March 2014

Isn't gift of proprty made any difference?

Hiren shah (Article Assistant) (35 Points)
Replied 07 March 2014

totally agree with above answers. and no gift doesnt matter..but u can save ltcg by reinvesting in many way..refer section 54.

Kush Patil (Article assistant) (21 Points)
Replied 07 March 2014

In cases of gift it doesn't amount to transfer, so the indexed cost of acquisition will be from the date the previous owner first acquired it. Hence Indexed COA will be calculated on 100,000.

Vikas Jain (Student) (80 Points)
Replied 08 March 2014

gift received from relative will not attract capital gains tax but it's subsequent sale attracts capital gains tax. to constitute whether it is LTCG or STCG, period of holding shall be considered I.e, asset held right from predecessor(father). indexed cost of acquisition: COA *CII in the year of transfer/ CII in the year in which it is first held by assessee. 100000*939/852:112559 will be your ICOA

Arpit Pachisia (CA) (734 Points)
Replied 08 March 2014

Sorry Vikas,

But above suggestions are true. As the indexed cost of acquisition will be from the date the previous owner acquired it. Hence Indexed COA will be calculated from 15/04/1986 i.e.140.

ICOA will be 100000*939/140 = 6,70,714.

Thanks to all for your reply.

Vikas Jain (Student) (80 Points)
Replied 08 March 2014

Hi Arpit, The solution which I provided is correct and if you want me to prove,then you can refer Capital Gains Tax Chapter in any of the book which you are following.

Tarveen Mangal (Internal Auditor) (22 Points)
Replied 08 March 2014

Agree with above suggestions

neha sharma (student) (27 Points)
Replied 09 March 2014

As per judgement of bombay high court in case of manjula j shah (2012) 204 taxman 691 ( bombay ) indexed cost of aquisition from the date when previous owner aquired it.indexed of coa calculated on 1000000.

Vikas Jain (Student) (80 Points)
Replied 09 March 2014

Hey...everyone knows that it is Rs.100,000 on which ICOA should be calculated.. But right now the point is regarding disclosure of indexation figures not the cost

Arpit Pachisia (CA) (734 Points)
Replied 10 March 2014

Hello Vikas,

Read section 49(1) inserted by finance act 2012, where it is clearly written that the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner acquired it as increased by the cost of improvements incurred by the previous owner and the assessee.

Also read clause (i) to (v) of section 47.

I am sure that your doubts will be clear now.

Thanking You

Arpit Pachisia (CA) (734 Points)
Replied 10 March 2014

please read the above stated case too i.e. CIT v. Manjula J. Shah

Vikas Jain (Student) (80 Points)
Replied 10 March 2014

Hi Arpit, I already told that the discussion which is going right now is not about that what is actual COA but it is about what are the Indexation figures that are to be used to calculate ICOA. See my earlier example. I also took 100,000 as COA, but look CII FIGURES