CAPITAL GAINS TAX IV

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.