LT Capital Gain- House Sale

Tax planning 650 views 2 replies

Krishna

Consultant

34 Points Joined January 2009

Request assistance in finding out the tax-deductible Indexed Cost for Long-term Capital Gains for following situation in New Delhi. A person wishes to sell a property in 2011, and has incurred following Capital Expenditures towards it: A. LAND obtained on Lease from DDA- Lease Rentals paid Annually from 1972 till 1996. B. LAND converted to FREEHOLD in 1996 on payment of Conversion Fee to DDA. C. CONSTRUCTION carried out in three phase: C-1: 1973: One Floor Constructed C-2: 1985: Another Floor Added. C-3: 2004: Substantial Renovation Expense incurred. If the owner sells this property now, how would the Indexed Cost of Acquisition be computed for these elements of cost? Thank you.

Replies (2)

CA NITUL MEHTA

KPMG-Senior Consultant-International Tax

236 Points Joined September 2008

very simple when ever the expenses have incurred put in the numerator the inflation index of 201-11 and in the demoniator the inflation index of the year in which expenditure incurred and multiply with the actual expenditure incurred you will get indexed cost and continue with yur calculation then

Krishna

Consultant

34 Points Joined January 2009

Thanks Nimit ji. Just to reconfirm, I have understood the following towards some of my specific doubts : 1. Capital Expenditure in different stages will be deductible from the current selling price, after individual Indexation. 2. The Land Acquisition Price paid through Annual Lease Instalments to the city Development Authority over many years is a part of such capital expenditure. 3. The large Renovation expense in 2004 may also be considered towards the asset acqusition cost. In case any of these points is erroneous, will appreciate a further clarification. Thank you.