Mihir (Wealth Manager) (5293 Points)
16 August 2011Cost of improvement, too, is taken in the consideration in order to arrive at the long term capital gain in case of immoveable property. How does one prove the expenses incurred in the immoveable property to avail the benefits? What if there are no bills related to these expenses incurred? What if there are many dates/years in which improvements/enhancements were made to the immoveable property? How does one calculate that?
Thanks, would appreciate the answer with an example.
CA PARAS BAFNA
(Practising CA )
(33428 Points)
Replied 16 August 2011
Cost of improvement, as the name suggest, does n't mean normal repairs.
Suppose one has purchased a house constructed upto Ground floor only on 1.12.2007 for Rs 500000. Price paid- will be cost of acquisition.
Now, the sidewalls which were of 5 feet hieght only, raised to 7 feet till 31.3.2008. Expenditure incurred 30000. It is the improvement cost.
Aftersometime, according to plan ans permission , he slowly starts to constructs First Floor. Upto 31.3.2010 he inccurs expenditure of Rs 40500/-. From 1.4.2010 to 28.06.2010 the work has been completed and further Rs. 80500/ has been spent. These costs will be added to the cost of the property as cost of improvement.
As on 1.03.2011 , suppose this entire house is sold. Indexation will be made in respect of Cost of acquisition as Cost of Improvement in the following manner , so as to arrive Total Indexed Cost of the property-
1. INDEXED COST OF ACQUISITION =(500000 x CIF 2010-11)/CIF 2007-08
2. INDEXED COST OF IMPROVEMENT =(30000 x CIF 2010-11)/CIF 2007-08+ (40500x CIF 2010-11)/CIF 2009-10+(80500 x CIF 2010-11)/CIF 2010-11.
3. TOTAL INDEXED COST =1+2
CA YOGESH GARG GMG PLYWOODS
(BUSINESS OF PLYWOOD and PARTNER IN GUPTA & MALHOTRA CHARTERED ACCOUNTANTS)
(248 Points)
Replied 18 August 2011
sir my Question is
Cost of improvement is taken in the consideration in order to arrive at the long term capital gain in case of immoveable property. How does one prove the expenses incurred in the immoveable property to avail the benefits? What if there are no bills related to these expenses incurred?? how can we prove our exp to deptt
Arihanth Jain
(Chartered Accountant)
(1226 Points)
Replied 18 August 2011
Generally I believe a reasonable percentage of the sale value should be acceptable to the AO even without bills. If the expense incurred is material in nature then obviously bills/vouchers should be available like commissions paid to brokers etc., as the amount will be comparitatively material.
Other views are also welcomed.
Ankita Kala
(nil)
(39 Points)
Replied 15 September 2013
Hi,
My concern is about a residential property. Would repairs or say, refurbishment, i.e. tiling and flooring be included in cost of improvement?
meenakshi
(Head - Finance)
(56 Points)
Replied 08 January 2014
Thanks! But is it necessary that the improvement date should also cover a period of 36 months before the sale date to get the benefit of the capital gains?
shruti
(CA)
(21 Points)
Replied 14 July 2016
furniture & fixture is also included in cost of improvement?
Aman Rawat
(2 Points)
Replied 13 April 2021
My queries as Property seller are::
1) Would the repairs or refurbishment works , i.e. tiling and flooring be included in the cost of improvement? while calculating the LTCG.
2) What are the terms and conditions on part of the Seller in order to claim full refund of 1% TDS deducted by the property buyer?
Please respond
CAclubindia
