Example I: (Specified Date 1 04 1981)
Land extent: 1,200 sqft
|
ResidentialBuilding BUA: 1,200
sqft
|
Improvement: addition +
refurbishment
|
Year sold
|
Year bought: 1975 in Chennai, Mylapore
|
Year constructed: 1975, BUA: 1,200 sqft
|
Year: 1990 - 91
|
2006 - 07
|
Land Value:Rs. 72,000/= (say A)
|
DRC: Rs. 1,08,000 Say (B)
|
Rs. 1,20,000/= (600 sqft added)
|
Rs. 1,00,00,000
|
Value on 1/4/1981
|
Value on 1/4/1981
A+B:Rs. 1,80,000/=
|
1990 - 91
|
2006 - 07
|
CII: 100
|
100
|
182
|
519
|
Computation of Capital gain:
Selling Price (Say S)
|
INR
|
1,00,00,000
|
|
Selling expenses (Say C)
|
2,50,000
|
Indexed Acquisition Cost:
1,80,000 * 519/ 100 (Say D)
|
9,34,200
|
Indexed cost of improvement:
1,20,000 * 519/182 (say E) With Document
Proof
|
3,42,198
|
Capital Gains: S (C+D+E) Say CG
|
84,73,602
|
S. 54 (Exemption) Re-investment
towards new residential property one year prior to date of transfer. Say RI)
|
98,00,000
|
Capital gains
|
0
|
Example 2: (Specified Date 1 04 1981)
An apartment building in Thiruvanmiyur,
Chennai, 860 sqft BUA, UDS of Land: 516 sqft, cost of acquisition is Rs
17,00,000/= during 1989 -1990 (As per Deed of Apartment). During the same year,
an amount of Rupee 2,50,000/= was spent towards interior decoration. The
property was sold during FY 2009-10 for a consideration of Rupee 90,00,000/=.
Cost of sale is Rupee 2,25,000/= CII during 1989-90: 172 and 2009- 10 is: 632
Computation of Capital gain:
Selling Price (Say S)
|
INR
|
90,00,00,000
|
|
Selling expenses (Say C)
|
2,25,000
|
Indexed Acquisition Cost:
17,00,000 * 632/ 172 (Say D)
|
62,46,512
|
Indexed cost of improvement:
2,50,000 * 632/172 (say E) With Document
Proof
|
9,18,605
|
Capital Gains: S (C+D+E) Say CG
|
16,09,883
|
S. 54 (Exemption) Investment of
capital gains in certain fund (Say RF)
|
50,00,000
|
Capital gains
An individual or a HUF
(Formula for deductible:
Amount invested / Net Consideration * LTCG)
|
7,15,504
|
Example 3: (Specified
Date: 1/4/1981)
An apartment building admeasuring 700
sqft was purchased in Chennai during 1970 at Rupee 30,000/=.
During redevelopment process Builder
offered 50% extra, which would make the new flat 1,050 sqft. Mr. X
opted for 860 sqft and surrendered 190
sqft for a consideration of Rupee 13,30,000/=, which the builder has agreed to
pay in six installments during the next three financial years from FY 2010-11
and Mr. X has handed over the initialresidentialflat to the builder. CII during
1981-82: 100 and 2010-11 is: 711. Mr X can claim exemption if his flat is
handed over within 3 year from 2010-11 and market value of flat is Rupee
65,00,000/= (Based on surrendered flat composite rate as on 2010-11)
Sales consideration = Rs.
13,30,000 (Surrendered Value of 190 sqft) + Cost of construction of Flat of
860 sqft. (Say S)
|
INR
|
23,62,000
|
|
Selling expenses (Say C)
|
0
|
Indexed Acquisition Cost: 30000
* 711/ 100 (Say D)
|
2,13,300
|
Indexed cost of
improvement:(say E)
|
0
|
Capital Gains: S (C+D+E) Say CG
|
21,48,700
|
S. 54 exemption Re-Investment
towards new residential property within 2 years after
the date of transfer or within
3 years in an under construction property(Say RC)
|
65,00,000
|
Capital gains (In the
authors opinion)
|
0
|
Example 4: The
acquisition cost as on 1st April, 1981 is (Land CU 70 and Depreciated
Replacement Cost of Residential Building is
CU 100). Improvement is done on 1985-86 to the tune of CU 120. It was sold on
2002-03 for a consideration of CU 5,000/= Determine the capital gains as per
cost of acquisition and valuation by fair market value (FMV). CII as on
1981-82: 100; 1985-86: 133 & 2002 - 03: 447 (Specified Date: 01 04 1981)
The property is in a prime location,
near to Bus and Metro Station and famous temple. The plot has return frontage. The land value is
increased 35% for return frontage, location & situation, size, and shape, comparing
with the data land which doesn’t have. Land value CU: 70 x 1.35 = CU 95 psf
Valuation by Cost of
Acquisition
|
Valuation by FMV (Fair
Market Value)
|
Selling Price Say S: CU (Cost
per unit sq.ft or sq.meter etc) 5,000
|
Selling Price Say S: CU 5,000
|
Indexed acquisition cost Say C:(70+100) x 447/100
= CU 760
|
Indexed acquisition cost Say C: (95+100) x
447/100= CU 872
|
Indexed cost of improvement Say D: 120 x 447/133:
CU 403
|
Indexed cost of improvement Say D: 120 x 447/133:
CU 403
|
Selling expenses Say E: CU 113
|
Selling expenses Say E: CU 113
|
Capital Gains: S (C+D+E): CU 3,724
|
Capital Gains: S (C+D+E): CU 3,612
|
The assessee can opt for cost of
acquisition or fair market value as on 1 04 -1981, where the capital asset
became the property of the assesse before 1st April 1981 and where the capital
asset became the property of the previous owner before the 1st April, 1981
means the cost of the capital to the previous owner or the market value of the
asset on the 1st day of April, 1981 at the option of the assessee. S.
55 (2) (b) (i) (ii) & (iii Liquidation)
Property acquire after 1st April, 1981,
only cost of acquisition should be taken. The cost of acquisition needs to be
appropriately indexed based on the prescribed CII
for the Financial Year of purchase and sale, respectively on the date of
acquisition and improvement after 1-4-1981.
Disclaimer: In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.
It may be noted that nothing contained in this note should be regarded as our opinion. Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views. This blog, between contributor and readers, shall not create any attorney-client relationship.