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Should I take Cost of improvement or not on vacant land?

Pradyumna (.) (29 Points)

30 October 2022

My grandfather bought land in 1995 and he died in 2016 my father and his brothers sold that land on 12 June 2022 .

Following are some information I need while calculating long term capital gain .

1.Cost of acquisition should be on 1/4/2001 stamp duty value or fair market value

2. Invest in 54EC bond before 12 dec 2022 ?

3. Can we take Cost of improvement CII on vacant land Like fencing, landscaping and etc and above cost incurred by grandfather in 2003, 2009and my father also incurred some cost of improvement in 2018.

Please help me solve my doubts

Thank you

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9 Replies

rama krishnan (12234 Points)
Replied 31 October 2022

1. it can be either sdv or fmv estimated by registered valuer

2. yes, to avail capital gains deduction

3. yes, you can claim indexed cost on improvements

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174763 Points)
Replied 31 October 2022

Agree with above, except the land value should be Stamp duty value as on 01.04.2001 and not FMV.

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rama krishnan (12234 Points)
Replied 31 October 2022

As per section 55, the coa has to be sdv or fmv as on 01/04/2001, subject to the conditions that fmv shall not exceed sdv

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174763 Points)
Replied 31 October 2022

As per the condition specified, it is always beneficial to take SDV by assesses,

rama krishnan (12234 Points)
Replied 31 October 2022

Yes agreed sir, I just quoted what have been enumerated in section 55

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174763 Points)
Replied 31 October 2022

As per amendment in the section... by the Act No. 12 of 2020, w.e.f. 1-4-2021.

The extract from the section now reads as follows....

Sec. 55(2)(ac) ............

Explanation...(b) ......

in relation to any other capital asset,—

(i) where the capital asset became the property of the assessee before the 1st day of April, 2001, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 2001, at the option of the assessee ;

(ii) where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of section 49 and the capital asset became the property of the previous owner before the 1st day of April, 2001, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 2001, at the option of the assessee :

[Provided that in case of a capital asset referred to in sub-clauses (i) and (ii), being land or building or both, the fair market value of such asset on the 1st day of April, 2001 for the purposes of the said sub-clauses shall not exceed the stamp duty value, wherever available, of such asset as on the 1st day of April, 2001.

Explanation.—For the purposes of this proviso, "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.] ........

Continued......

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Pradyumna (.) (29 Points)
Replied 07 November 2022

Originally posted by : rama krishnan
	1. it can be either sdv or fmv estimated by registered valuer2. yes, to avail capital gains deduction3. yes, you can claim indexed cost on improvements

Sir can I take Cost of improvement on amount spend by grandfather and my father combined

or only amount spend by father only

Pradyumna (.) (29 Points)
Replied 07 November 2022

Originally posted by : Dhirajlal Rambhia
	Agree with above, except the land value should be Stamp duty value as on 01.04.2001 and not FMV.

Sir can I take Cost of improvement on amount spend by grandfather and my father or only amount spend by father only

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (174763 Points)
Replied 07 November 2022

When cost of investment is considered as per SDV as on 01.04.2001, you cannot take any COI before that date (like 1995 by your GF), but you can consider any COI after 2001.

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