Cost of Acquisition for LTCG calculation on sale of property
This query is : Resolved
06 August 2024
Hi,
I bought an under construction apartment in 2006 directly from a local builder and paid via installments (a total of XX Lakhs) for which an agreement for sale was executed and installments were paid based on construction progress, I was also able to finance a part of the purchase via home loan from bank using the AFS as basis for YY lakhs which I was able to repay with interest in around 5 years. The apartment was registered in my name in 2008 with Sale deed reflecting only value of N Lakhs (without including Registration and Stamp Duty) by builder
Now I am trying to sell this property in 2024. I had the following questions:
1) What would be the Cost of acquisition for this flat I can use since Sale deed only reflects N Lakhs but I actually paid XX lakhs as per AFS to builder (I also have bank loan of YY lakhs as proof)? (YY+N=XX)
2) Can I show YY Lakhs as Cost of betterment to be included if only N lakhs is allowed as Cost of acquisition in 1)?
3) Assuming that Indexation benefit is still available to me in current FY, What would be the indexed cost of acquisition (apply indexation factor 363/122 around 2.97) to entire XX lakhs. Please confirm the indexed cost of acquisition I can use to calculated LTCG?
4) Assuming indexation benefit is not available to me in current FY, what would be the unindexed Cost of acquisition for the apartment?
Thanks for the clarification in advance.
Regards,
I bought an under construction apartment in 2006 directly from a local builder and paid via installments (a total of XX Lakhs) for which an agreement for sale was executed and installments were paid based on construction progress, I was also able to finance a part of the purchase via home loan from bank using the AFS as basis for YY lakhs which I was able to repay with interest in around 5 years. The apartment was registered in my name in 2008 with Sale deed reflecting only value of N Lakhs (without including Registration and Stamp Duty) by builder
Now I am trying to sell this property in 2024. I had the following questions:
1) What would be the Cost of acquisition for this flat I can use since Sale deed only reflects N Lakhs but I actually paid XX lakhs as per AFS to builder (I also have bank loan of YY lakhs as proof)? (YY+N=XX)
2) Can I show YY Lakhs as Cost of betterment to be included if only N lakhs is allowed as Cost of acquisition in 1)?
3) Assuming that Indexation benefit is still available to me in current FY, What would be the indexed cost of acquisition (apply indexation factor 363/122 around 2.97) to entire XX lakhs. Please confirm the indexed cost of acquisition I can use to calculated LTCG?
4) Assuming indexation benefit is not available to me in current FY, what would be the unindexed Cost of acquisition for the apartment?
Thanks for the clarification in advance.
Regards,
06 August 2024
1. the sales deed establishes the cost of the property.
2. Any other cost, at best, can just be shown as improvements. If the payments are made to the builder on record, it would be easy to establish this.
3. interest costs are no more included in the cost of the property or improvement.
4. same applies to stamp duty and registration charges.
5. assuming no changes in the finance bill, indexation is not permitted.
the actual costs paid excluding registration charges, stamp duty and interest costs is your cost. Cost of improvement again to be taken as actual money paid for it.
2. Any other cost, at best, can just be shown as improvements. If the payments are made to the builder on record, it would be easy to establish this.
3. interest costs are no more included in the cost of the property or improvement.
4. same applies to stamp duty and registration charges.
5. assuming no changes in the finance bill, indexation is not permitted.
the actual costs paid excluding registration charges, stamp duty and interest costs is your cost. Cost of improvement again to be taken as actual money paid for it.
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06 August 2024
Thanks for the prompt response, You have mentioned that " Any other cost, at best, can just be shown as improvements. If the payments are made to the builder on record, it would be easy to establish this".
In my case I have proof that the payments were made directly to the builder (as loan amount was disbursed in builder name directly). So can I include this amount in calculating cost of acquisition even though it is not included on Sale deed value?
In my case I have proof that the payments were made directly to the builder (as loan amount was disbursed in builder name directly). So can I include this amount in calculating cost of acquisition even though it is not included on Sale deed value?
06 August 2024
my view is that you should be able to account for these payments one way or the other - as cost of house or improvements. Why I would not include it in cost of acquisition directly is because in case your case is picked up for assessment, it would become a task to prove the cost of acquisition in absence of the same amount being reflected in purchase deed.
07 August 2024
Thanks for the response. Since now it seems that Taxpayers are being offered two options – either choose computation of tax on long-term capital gains at 12.5% rate without indexation or at 20% with indexation benefit on properties acquired until July 23, 2024.
1) Can I claim indexation benefit on both Sale deed amount (cost of acquisition) and also on the Cost of Betterment if both are incurred together on same date if I choose the option with indexation?
2) if I have multiple payments incurred for betterment of apartment across different years, Do I calculate the different indexation that will apply for each payment separately and then add the total and show as consolidated Indexed value of Betterment? Hope this is the correct approach to calculate this?
1) Can I claim indexation benefit on both Sale deed amount (cost of acquisition) and also on the Cost of Betterment if both are incurred together on same date if I choose the option with indexation?
2) if I have multiple payments incurred for betterment of apartment across different years, Do I calculate the different indexation that will apply for each payment separately and then add the total and show as consolidated Indexed value of Betterment? Hope this is the correct approach to calculate this?
07 August 2024
yeah. I was just about add a response that may be you should wait for the final finance act to be passed. Once that is done, you can explore whether indexation is beneficial for you or not.
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