Long term capital gain on sale of land structure

This query is : Resolved

Prashant Sawant (Querist)
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17 January 2016
Hi All,

Wanted to know Long Term Capital Gain Tax treatment in below scenario

Land structure developed with house purchased in 1960 for worth INR. 2000 by Mr. A.

Mr. A expired in 2006 and as asset is transferred in 2006 to his legal heirs (Wife, Son, Daughter) equally (1/3)

The said structure is proposed for sale by existing legal heirs in 2016 with an exchange of Flat.

The said deal is planned as below;

Land with house structure is proposed for sale @ INR 50 Lacs against Flat Purchase of INR 40 Lacs through deed of exchange and proposed buyer shall pay deficit of INR 10 Lacs to existing legal heirs through this deed.

Questions;

1. Which year to consider as base year for Cost Indexation - 1960 or 2006
2. Is improvement cost incurred so far on the land structure to be considered/reduced from sales value while calculating LTCG
3. Since cost of purchase of new flat is less than (e.g. INR 40 Lacs) than sale value of land structure (e.g. INR 50 Lacs), though its reinvestment, but what is required to be done with deficit amount of INR 10 Lacs. When & Where it need to be invested to save LTCG Tax
4. Since there are 3 legal heirs involved in this deal, how to work out impact of LTCG (if any) in all of theirs individual tax computation...Equally...? or else...>

If possible, provide detail calculation..

Kindly revert.

Regards,
Prashant Sawant.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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17 January 2016 1. In this case, FMV as on 1.4.1981 to be taken. Indexation benefit is available from this year Ref. Manjula V. Shah's case;
2. Indexed cost improvement incurred after 01-04-1981 can be deducted from full value of consideration.
3. Capital gain can be invested in a residential house property u/s 54 or NHAI bonds u/s 54EC;
4. If sale is after partition of the property, it can be assessed in the 3 different hands otherwise it has to be assessed in the hands of HUF.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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17 January 2016 1. As per Explanation (iii) to Section 48 indexed cost of acquisition will be calculated on the basis of the market value of the property as on 1.4.1981.
2. Cost of improvement incurred after 1.4.1981 can be considered for indexation. It is also deductible from the full value of sales consideration.
3. If the property values are in accordance with the stamp duty valuation or higher, capital gains will be calculated in the following manner-
1. Sales Consideration
2. Less: Expenditure incurred for sale like brokerage etc
3. Net Sales Consideration (1-2)
4. Less: Indexed Cost of Acquisition
5.Less: Indexed cost of improvements done after 01.04.1981.
6. Long Term Capital Gains (3-(4+5))
There may not be capital gains in this case.
Still, for your information you may refer Section 54EC- Investment in REC and NHAI bonds.
4. Computation of long term capital will be made in respect to the whole property. Then assessee's share will be determined and shown in his return in all the three family members.

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