03 February 2016
Capital gain: Mrs. Anitha purchased agriculture Land on 22-08-2008 for Rs. 45,000/- later she converted that Agricultural land into Non Agricultural land by incurring cost of Rs.48,000/- on 09/03/2014 then she gifted that Property to her brother Mr. Sunil by executing the gift deed on 12/06/2014 then he has incurred cost of Rs.200,000 for fencing and 2,05,000 for digging of Bore well then Mr. Sunil sold the above property to Mrs. Deepa and Mrs. Mamatha on 13-11-2014 for Rs 18,63,000/- Hence for the purpose of calculating capital gain I solved above mentioned case like this: Agricultural land is not a capital asset so here in this case it will become the capital asset only from the date 09-03-2014. So it will be a short term capital gain to Mr. Sunil. So I took the cost of acquisition as stamp value of the property on the date of conversion. So please tell me whether my solution for the problem is correct or not.
03 February 2016
Rural agricultural land is capital asset but excluded u/s 2(14) for the purposes of capital gain computation;
You may consider cost to the previous owner i.e. Rs. 45,000 + COI Rs. 48,000 u/s 49(1)(ii) and period of holding from 22-08-2008 to 12-11-2014 as per explanation 1(b) to section 2(42A).
03 February 2016
dear sir Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains.and here in this case its converted for non agri purpose on 09-03-2014. so from 09.03.2014 it becomes capital asset right? please clarify this one
18 July 2024
Your approach to the problem is mostly correct, but let's clarify and verify the steps for calculating capital gains in this case:
1. **Conversion of Agricultural Land to Non-Agricultural Land:** - Mrs. Anitha purchased agricultural land on 22-08-2008 for Rs. 45,000/-. Agricultural land is not considered a capital asset, so no capital gains are calculated up to the date of conversion. - The land was converted into non-agricultural land on 09/03/2014, incurring a cost of Rs. 48,000/-. From this date (09/03/2014), the land becomes a capital asset.
2. **Gift to Mr. Sunil:** - Mrs. Anitha gifted the property to her brother Mr. Sunil on 12/06/2014. For the purpose of calculating capital gains in the hands of Mr. Sunil, the cost of acquisition will be considered as the market value of the property on the date it became a capital asset, which is 09/03/2014. This would generally be the stamp duty value or fair market value on that date.
3. **Improvements by Mr. Sunil:** - Mr. Sunil incurred additional expenses on the property: - Rs. 2,00,000 for fencing. - Rs. 2,05,000 for digging a bore well.
These expenses can be added to the cost of acquisition for the purpose of calculating capital gains.
4. **Sale to Mrs. Deepa and Mrs. Mamatha:** - Mr. Sunil sold the property for Rs. 18,63,000/-.
5. **Calculation of Capital Gain:** - **Sale Consideration:** Rs. 18,63,000/- - **Less: Cost of Acquisition:** Stamp duty value or fair market value on 09/03/2014 (considering the conversion date), plus any subsequent improvements (fencing and bore well costs). - **Less: Expenses incurred on sale:** Such as brokerage or legal fees.
6. **Type of Capital Gain:** - Since the property was held for less than 3 years from the date it became a capital asset, the resulting gain would typically be considered short-term capital gain.
In summary, your approach to considering the property as a capital asset from the date of its conversion (09/03/2014) is correct. Ensure that you accurately determine the cost of acquisition as the stamp duty value or fair market value on that date, and include any subsequent improvements made by Mr. Sunil. This will give you the correct base for calculating the capital gains arising from the sale to Mrs. Deepa and Mrs. Mamatha.
18 July 2024
Your approach to the problem is mostly correct, but let's clarify and verify the steps for calculating capital gains in this case:
1. **Conversion of Agricultural Land to Non-Agricultural Land:** - Mrs. Anitha purchased agricultural land on 22-08-2008 for Rs. 45,000/-. Agricultural land is not considered a capital asset, so no capital gains are calculated up to the date of conversion. - The land was converted into non-agricultural land on 09/03/2014, incurring a cost of Rs. 48,000/-. From this date (09/03/2014), the land becomes a capital asset.
2. **Gift to Mr. Sunil:** - Mrs. Anitha gifted the property to her brother Mr. Sunil on 12/06/2014. For the purpose of calculating capital gains in the hands of Mr. Sunil, the cost of acquisition will be considered as the market value of the property on the date it became a capital asset, which is 09/03/2014. This would generally be the stamp duty value or fair market value on that date.
3. **Improvements by Mr. Sunil:** - Mr. Sunil incurred additional expenses on the property: - Rs. 2,00,000 for fencing. - Rs. 2,05,000 for digging a bore well.
These expenses can be added to the cost of acquisition for the purpose of calculating capital gains.
4. **Sale to Mrs. Deepa and Mrs. Mamatha:** - Mr. Sunil sold the property for Rs. 18,63,000/-.
5. **Calculation of Capital Gain:** - **Sale Consideration:** Rs. 18,63,000/- - **Less: Cost of Acquisition:** Stamp duty value or fair market value on 09/03/2014 (considering the conversion date), plus any subsequent improvements (fencing and bore well costs). - **Less: Expenses incurred on sale:** Such as brokerage or legal fees.
6. **Type of Capital Gain:** - Since the property was held for less than 3 years from the date it became a capital asset, the resulting gain would typically be considered short-term capital gain.
In summary, your approach to considering the property as a capital asset from the date of its conversion (09/03/2014) is correct. Ensure that you accurately determine the cost of acquisition as the stamp duty value or fair market value on that date, and include any subsequent improvements made by Mr. Sunil. This will give you the correct base for calculating the capital gains arising from the sale to Mrs. Deepa and Mrs. Mamatha.
CAclubindia
