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Capital gain

17 February 2014

Dear all, I want to ask, if a plot bought in 2000 for 2.5 lakhs after taking a loan of rs. 5lakhs and construction completed on it in the yr 2005 for rs 5 lakhs. an education loan of 10 lakhs was taken by the owner for his son in the yr 2012.. now in 2014 the owner wants to sell it at rs. 85 lakhs, to buy a plot and build a house on it but the home loan is still standing at 2 lakhs, whole amt of education loan.. what will be the capital gain and what needs to be done to evade capitalgain

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Z ( ) (2965 Points)
Replied 17 February 2014

So you bought a land & thereafter constructed building thereon. The holding period of both the assets are different & both land & building are identifiable. therefore cap gain shall be computed separately for land & building This view is also supported by judgement of C.R SUBRAMANIAN , D.L. RAMACHANDRA RAO madras hc & there are atleast 4 other hc judgement ,suggesting the same treatment Now you know that what shall be your indexed cost ,you need to find consideration It purports that there is a single lumpsum amount as consideration but you need to bifurcate it so as to compute cap gain individually S 50D Stipulates that if full value consideration is not ascertainable then FAIR MARKET VALUE SHOULD BE TAKEN as full value consideration THEREFORE YOU NEED TO COMPUTE FAIR MARKET VALUE OF BOTH If you are not able to do so then use S 50C VALUE FOR LAND & remaining consideration shall be towards building EXEMPTION CAN BE AVAILED u/s 54 IF YOU DO NOT OWN MORE THAN 2 RESIDENTIAL HOUSE PROPERTY (INCLUDING THE NEW ONE) For time limit (2 years , 1year or 3year ) & other details see the sec as many issues arise from there also