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Indexed cost of property

chaitanya (ceo) (176 Points)

12 December 2015

hi namaste,

this is regarding indexed cpost of property sold.

booked a flat with a Builder in 2006 and entered the construction agreement . Payments to builders were made in 10 instalments. Got Possession in 2008. now the property is sold in Dec. 2015.

I know that it isa a long term gain.

but I do not know how to calculate Index cost .As I have Paid 10 instaments, shall i calculate indexed cost for each instalment or ......otherwise

please guide

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11 Replies

jaya krishna (Chartered Accountant) (262 Points)
Replied 12 December 2015

cost assets includes all instalments(excluding interest if there is any). indexation from the transfer or aquisation of asset.

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chaitanya (ceo) (176 Points)
Replied 12 December 2015

thank you,

sir, you mean to say total cos of t assest to be indexed to the date of acquisition and not instalment wise .

Further Ihave 2 houses . 1 sold and having another.

want to invest capital gain in new construction

am i eligable to get exemption on new construction

jaya krishna (Chartered Accountant) (262 Points)
Replied 12 December 2015

no in this case ur not eligible for excemption.

you can eligible under section 54EC investment made in specific bonds

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 12 December 2015

Indexation of cost of acquisition is to be taken from the year in which property is held. So COA is to be calculated from 2008.

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 13 December 2015

Indexation of cost of acquisition is to be taken from the year in which property is held. So COA is to be calculated from 2008.

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Z ( ) (2965 Points)
Replied 13 December 2015

Originally posted by : chaitanya
	thank you, sir, you mean to say total cos of t assest to be indexed to the date of acquisition and not instalment wise . Further Ihave 2 houses . 1 sold and having another. want to invest capital gain in new construction am i eligable to get exemption on new construction

Since you are selling a flat, i.e a residential house property, you are eligible to claim exemption u/s 54 for construction of the house. No where u/s 54 there is any condition that assessee should not own more than 2 houses.

It is under section 54F, that this condition of not owing more than 2 residential house properties (including the new one) is provided for.

Further you said, " Ihave 2 houses . 1 sold and having another."

This means in net you have only 1 house, hence no issues.

You can claim exemption either u/s 54 or u/s 54EC, as per your requirements.

Extracts from proviso to S.54F

Provided that nothing contained in this sub-section shall apply where—

(a) the assessee,—

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset;

Section 54

54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—

(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

jaya krishna (Chartered Accountant) (262 Points)
Replied 13 December 2015

Section 54F states that There must be transfer of a long term capital asset, not being a residential House.... The assessee should not own more than one residential House on the date of transfer....