Vijayaraghavan R (Employee) (63 Points)
07 August 2013Hi
A property is registered for Rs. 1 lakh. A loan of RS. 15 lakh has been borrowed for its purchase. Improvement made for Rs. 3 lakhs. On sale what will be the value of that property for calculating capital gain. House has been held for more than 36 months.
Thanks
Mihir
(Wealth Manager)
(5293 Points)
Replied 07 August 2013
Long term capital gain is calculated as given below:
Sale value/price: XXXX
Less Transfer expenses
Less indexed cost of acquisition: XXXX
Less indexed cost of improvement: XXXX
Equals to Long term capital gain:
20.36% of ltcg is long term capital gain tax.
CA Vinit Ratnaparkhi
(Internal Auditor)
(66 Points)
Replied 07 August 2013
Dear Vijay
LTCG will be calculated as follows:-
(Rs.)
Sales Consideration xxxx
Less: Expenses incurred on such transfer (xxxx)
Net Sales Consideration xxxx
Less:
Indexed Cost Of Acquisition xxxx
Indexed Cost of Improvement xxxx (xxxx)
Capital Gains xxxx
Note: 1)The amount borrowed has nothing to do with calculation of capital gains.
2)Tax will be payable @ 20.60% (20% Tax + 3% SHEC & EC) on resultant capital gains
Vijayaraghavan R
(Employee)
(63 Points)
Replied 08 August 2013
| Originally posted by : vinit ratnaparkhi | ||
 |
Thanks for your response. The reason for specifying amount borrowed is to arrive at the cost of acquisition. The house value was 15 lakhs when bought but the documents registered has the value of Rs. 1 lakh. Now which one will the IT department accept as the value of the property. IF 1 lakh is considered then the CG will be more and it will be less if 15 lakh is considered.
Thanks |
 |
Mihir
(Wealth Manager)
(5293 Points)
Replied 08 August 2013
In law, one word has one definition but many meanings. So a person needs to understand the whole context of the matter to understand the meaning of one word.
Let me describe your question here.
You purchased a property having price of Rs. 15,00,000/-
You borrowed (not home loan) Rs. Rs. 15,00,000/- (interest rate is a question)
But the agreement had a price of only Rs. 100,000/-
You held the property for more than 36 months.
Now you are selling the property for 'X' amount
So the market price is Rs. 15,00,000/- and the stamp duty paid was on Rs. 100,000/-
I am assuming the large part of payment made was in cash.
Your question is whether the cost of acquisition shall be Rs. 100,000/- or Rs. 15,00,000 + interest paid.
Please confirm.
Vijayaraghavan R
(Employee)
(63 Points)
Replied 08 August 2013
ok. Let me try this..
Home loan borrowed is 15 lakhs. Agreement with the seller has 15 lakhs. It was entered in to agreement when being constructed. The registration happened after construction but for a lesser price. The property is registered for 1 lakh only.
Some part of purchase price that not covered by home loan, around 15-20%, was paid in cash/cheque. Around 1 lakh was spent on improvement. House was held for more than 36 months.
Thanks
Mihir
(Wealth Manager)
(5293 Points)
Replied 08 August 2013
I don't have the answer.
There is a difference between registering the property and registering the agreement.
But I think what you really mean by registered for Rs. 1 lacs is actually amount incurred in stampy duty and registration fees. When you have already entered into an agreement of Rs. 15 lacs, how can you reduce the agreement price to Rs. 1 lacs. You must have gven the true copy of the agreement to the bank for housing loan, then how did you make another agreement of Rs. 1 lac after the construction? How can there be two agreements for the same property with different price? Either I still don't know what has happened or there is something not right here.
Really confusing
Vijayaraghavan R
(Employee)
(63 Points)
Replied 08 August 2013
Ok. Atleast in my place it is common. An agreement with seller is different from the one with registration department. There is something called guide line value for house property which is fixed by the local registrar. It is enough to register the property at that price but actual market price is what will be paid to purchase the property. Usually these things like registering a property for lesser value will be done to pay lesser stamp duty.
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