Mr. A has a property which was acquired on lease for 99 years in 1980 for Rs. 10,000.
In 2010, he transfers his rights to the remainder period of the lease (69 years in thsi case) to Mr. B.
Mr. B pays Mr. A Rs. 1,00,000 for taking over lease of the property.
My question is how is this amount of Rs. 1,00,000 taxes in the hands of A.
Since a lease greater than 12 years means an ownership change, can we treat this income as income from sell of house property and avail the usual tax benefits ?
yup u r right....
Taxable as LTCG. Benefit of 54F can be availed of.
"Since a lease greater than 12 years means an ownership change"
Please clarify..
Taking this discussion forward- What would be the tax treatment in case he has developed a building on the lease hold land and has claimed YoY depreciation on it. Will it amount to LTCG and avail benefits of Sec.54 or it will be normal income from Business & Profession.
Best Regards Manish
"has claimed YoY depreciation on it."
Means the asset was in use for business or profession
Cap gain on Property of business and profession accrues when the block of asset is sold.
If the block of asset is sold then CG shall arise
Only building is liable for depriciation, If tenant incurs capital expense on the building then the same is allowed as per explanation 1 of S. 32(1) . But since in this case property is letout for more than 12 years therefore the assesse shall be deemed owner and consequently depriciation can be claimed by owner u/s 32(1)(ii)
Since the property was in use by business/profession it can not be deemed to be a residential house property and hence provisions of sec 54 shall not apply. Nonetheless there is transfer of capital asset liable to tax gain . However exemption can be availed u/s 54EC . Exemption u/s 54F is available to individual and HUFs only
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