18 July 2024
To calculate the capital gain in the scenario provided, we need to follow these steps:
1. **Cost of Acquisition:** - Since the property was acquired through a General Power of Attorney (GPA) up to 1994, we take the fair market value (FMV) as on 1st April 2001 or the actual cost of acquisition, whichever is higher, for computing capital gains. - FMV in 1994: Rs. 140,000
2. **Cost Inflation Index (CII):** - For the financial year 1994-95, the CII is 259. For the financial year 2006-07 (assuming the transfer happened in 2006), the CII is 519. For the financial year 2012-13, the CII is 852.
3. **Calculation of Indexed Cost of Acquisition (for 2006 transfer):** - Indexed Cost = Cost of Acquisition × (CII for year of transfer / CII for year of acquisition) - Indexed Cost = Rs. 140k × (519 / 259) - Indexed Cost = Rs. 140k × 2 - Indexed Cost = Rs. 280k
4. **Capital Gain Calculation:** - Capital Gain = Selling Price - (Indexed Cost of Acquisition + Cost of Improvement + Expenses incurred on transfer) - Selling Price = Rs. 1,500,000 - Indexed Cost of Acquisition (2006) = Rs. 280,000 (calculated above) - Stamp Duty Value (2006) = Rs. 950,000 (considered as the cost of acquisition for computing capital gains) - Cost Inflation Index (CII) for 2006-07 = 519
Let's calculate the capital gain:
- Indexed Cost of Acquisition (2006) = Rs. 280,000 - Selling Price = Rs. 1,500,000 - Capital Gain = Rs. 1,220,000
So, the capital gain on the sale of the property in 2012-13 would be Rs. 1,220,000.
**Important Notes:** - The capital gain is computed considering the indexed cost of acquisition based on the CII for the year of transfer (2006-07). - Stamp duty paid on the property in 2006 is considered as the cost of acquisition for the purpose of computing capital gains, even though the actual cost of acquisition through GPA was lower. - Consultation with a tax professional is recommended for precise calculation and compliance with tax laws.
CAclubindia
