Capital Gain on 4 floor house plans???

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Arun Dhawan

Audit Head

34 Points Joined August 2008

I have a Question!!!

Please Help me out on this... :)

One of my Client has a Property which he just got built from a Builder as per the popular 4 floor Plans i.e. Ground PLUS Three and has given the Top floor to the Builder and got some Consideration in return.

My Question is: How is the Taxability of this event is to be Handled?

He is the Owner of the Land and the old property on which a new property is now constructed. How to go about it.

He has the Remaining 3 floors with him.

Monetary Assumptions:

Say the Initial Purchase Price was 3 Lakh as on 1-4-1981;

Say the value of the Entire Building was 1 Crore before reconstruction and 1.6Crore, i.e.40 Lakhs per floor, Post Construction;

He gives the Forth Floor to the Builder and gets in consideration:

a) 10Lakhs (value taken lowest)

b) 25 Lakhs (value taken 1/4 th of 1 Cr)

c) 30 Lakhs (value taken greater than 1/4 th of 1 Cr and less that 1/4th of 1.6Cr)

d) 40 Lakhs (value taken 1/4th of 1.6Cr)

e) 50 Lakh (value taken greater than 1/4 th of 1.6Cr)

I am giving these values so that what ever is the most feasible Solution Set, Please Use the Appropriate Combination to Explain the Right Approach, Or please use any of your Figures to explain it.

Thanks

Arun

Replies (4)

Dheeraj

Learner

1100 Points Joined February 2009

as per my opinion

the cost taken is one forth of the value of house as on 01/04/1981.

but the amount taken as a cost should be after indexation.

for eg: the initial cost was Rs. 4 lac

than the value of 4th floor is to be Rs 1 lac's indexed cost

i.e Rs. 1 lac*711/100 = 7.11 lacs.

i may be wrong

please wait for the experts' reply

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

you did not mentioned the structure of earlier building, and the payment modes are specified in the agreement deed, u cant make sets by self.

the cost received would be cost of 4th floor + roof rights and LTCG applicable for sale of 25% of property. .

Arun Dhawan

Audit Head

34 Points Joined August 2008

Originally posted by : U S Sharma
	you did not mentioned the structure of earlier building, and the payment modes are specified in the agreement deed, u cant make sets by self. the cost received would be cost of 4th floor + roof rights and LTCG applicable for sale of 25% of property. .

Sir, I Assume the Initial Structure wont matter as, atleast this Housing Project, is on a Bunglow, and the land is free-hold in my client's name.

And the sets i have given, are a few possibilities, But You May assume Option (a) to be the one in this scenario, as all other costs are borne by The Builder, in lieu of Getting the Top Floor + terrace.

Rahul Agarwal

Future CA

217 Points Joined December 2007

See,

Suppose the initial purchase price is 4 lacs for the whole property,

therefore on 1/4th price the indexation would be applied, suppose the value comes to 30 lacs and the sale price is 50 lacs then LTCG would be 20 lacs.

To avoid taxation You can use the benefit of indexation on repairs.

Assumption: Sale price include the value of roof rights and the sale value determined is as per Municipal Value.

Regards,

Rahul