Tax on capital gain

This query is : Resolved

Guest

Guest (Querist)

14 July 2016 My mother acquired on property from my uncle in 1989 by way of registered gift deed worth Rs. 43000. She sold same in 2016. My query is:

1. Will the acquisition price be Rs. 43000 as it was a gift deed.
2. For the minor innovations (demolishing and reconstruction wall, installing door, etc) done post purchase, can she claim benefit while indexing if she there is no bill/paper support for same.
3. What items can be claimed for benefit?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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14 July 2016 1. Acquisition price is cost of the previous owner or FMV as on 1/4/1981 which ever is later.

2. Post acquisition expenses cited are in the nature of regular repairs, hence cannot be capitalized for indexation purpose.

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Guest

Guest (Querist)

14 July 2016 Since my uncle purchased the property from another person in 1982 at price say X, it means that purchase of Rs. X is to be indexed, right?

My query is why a Gift deed is mentioned to have an worth for certain amount (Rs. 43000)? What it means?

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Soumitra Basu

Soumitra Basu (Expert)
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16 July 2016 THE INDEXED COST OF THE ACQUISITION SHALL BE THE COST FOR THE PURPOSE OF CALCULATING CAPITAL GAIN. THE DEED VALUE IS VALUE OF THE GIFT AS DETERMINED BY YOUR UNCLE WHICH HAS NO RELATION WITH CALCULATION OF CAPITAL GAIN FOR INCOME TAX PURPOSE.

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Guest

Guest (Querist)

17 July 2016 Dear Mr. Basu, thank you very much for your reply. It's clear now. Kindly cite the relevant IT section or law which supports this.

Guest

Guest (Querist)

17 July 2016 I am actually searching for the relevant IT section / law which substantiates above way of determining cost of acquisition in case of a gift deed. Since it's an open forum, kindly request all to advise please.

Guest

Guest (Querist)

17 July 2016 To be specific my uncle purchased the property in Feb, 1982 and it was transferred in my mother's name in Oct, 1989. Which year shall be considered for purpose of indexing? FY 1981-82 or FY 1989-90?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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17 July 2016 1981-82. Inference - explanation to section 49(1)(ii).

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Guest

Guest (Querist)

17 July 2016 Dear Sir, thanks. Section 49(1)(ii) clarifies on the acquisition cost. Kindly help with the section which tells the base year for indexing purpose.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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17 July 2016 Pl see my article in https://www.caclubindia.com/articles/cost-of-acquisition-of-a-capital-asset-acquired-u-s-49-1-ii-iii-a-of-the-income-tax-act-1961-17790.asp