CAPITAL GAIN IN SALE OF FACTORY LAND.

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VIZEN CHAPANI (Querist)
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27 May 2011 WE ARE PLANNING TO DISPOSE OFF THE FACTORY LAND AND BUILDING. SINCE THE LAND WAS BEEN PURCHASE IN 2006, IT IS CONSIDERED AS LONG TERM CAPITAL GAIN. NOW IF WE ARE PURCHASING A NEW FACTORY LAND, THEN CAN THIS AMOUNT OF PURCHASE OF NEW LAND BE EXEMPT FROM THE LONG TERM CAPITAL GAIN ARISING OUT OF SALE OF OLD FACTORY LAND?

Ashok Asthana

Ashok Asthana (Expert)
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27 May 2011 As per section 54 of the IT Act, work out the present value of the land. In case the land you bought in 2006 was Rs. X, the value as on 1/4/2011 will be X*711/519, where 711 is the cost inflation index 0f 2010-2011 and 519 is the cost inflation index for the year 2006-07. The sale consideration-present value will amount to long term capital gains (say P).You have to invest this amount for purchase of new land. Suppose the purchase price of new land is Y, then the taxability of capital gains will be on P-Y i.e if the investment in new land is more than present vale (P)then there are no capital gains hence not taxable. For details refer Sec 54 of the IT Act.