Are Costs on Transfer of Property also to be Indexed?

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  1. How to calculate Indexed value of Flat in in 2016-17 in following case as the payments are made in different financial years having different Cost Inflation Index (CII). Whether the legal costs of purchase (registration fee, stamp duty etc) are also to be considered. indexed and if so, how to do that in case given below.
    1) Purchased a Flat as first owner from Army Welfare Housing Organisation
    2) Purchase price of flat – Rs. 7,11,900/-
    3) Sale Consideration Value - Rs. 3,62,323
    4) Flat was allotted on 23.03.1998
    5) Payment details are given below.
    a - Registration (Booking amount) - Rs 20,500/- on 02.03.1998 (FY1997-98, CII - 331)
    b - First Part Payment - Rs. 20,000/- on 30.03.1998 (FY1997-98, CII - 331)
    c - Final Payment - Rs. 6,71,400/- on 16.04.1998 (FY1998-99, CII - 351)
    d - Legal Cost for Purchase - Rs. 41,300/- on 23.02.2001 (FY2000-01, CII - 406)
    i.e. Sale deed (Registration).
    Please note that Sale Consideration Value Rs. 3,62,323/- was estimated by Authorities as cost of specific unit for Stamp Duty purpose, excluding the cost of common facilities

    My specific queries are –
    1. Which CII value is to be considered - 1997-98 or 1998-99
    2. Whether the legal costs of purchase are to be considered, and if so, should it also be indexed and which financial year CII shall be used for indexation of Legal costs.
     
  2. sai tejesh(ca.final)

    sai tejesh(ca.final) Active Member

    Indexation benefit is available from the date of acquisition of the property.
    So here you had acquired the property in the year 1997-98 and indexation benefit is available from the year 1997-98.And is not required to see when & in which year installment amounts were made.
    Since legal cost is the additional cost of property incurred in the year 2000-01,it shall be indexed from the year 2000-01
     
  3. Thanks Mr. Tejesh. But ITR-2 xls sheet, does not say about indexation for Expenditure on transfer whereas for Cost of acquisition and improvements, it says so. For ready reference reproduced below the relevant section of xls sheet.
    Deductions under section 48


    i Cost of acquisition with indexation (bi)
    ii Cost of Improvement with indexation (bii)
    iii Expenditure wholly and exclusively in connection with transfer (biii)
    iv Total (bi + bii + biii)

    Please clarify






     
  4. Manoj Mehra

    Manoj Mehra Active Member

    Transfer and Legal Cost on purchase of property would be added to the Cost of Acquisition and then the Cost of Acquisition would be indexed.

    Transfer and Legal Cost on sale of property would not be indexed.
     
  5. sai tejesh(ca.final)

    sai tejesh(ca.final) Active Member

    "expenditure incurred wholly & exclusively in connection with transfer".It is the expenditure which you have incurred for transfer of the property.So it does not forms part of cost of acquisition.
    Once if it does not form part of cost of acquisition,then indexation benefit also will not be available.
    Reduce this expenses from sale consideration to arrive at net consideration and then claim cost of acquisition after indexation.
     
  6. Thanks. Ref remark of Mr. Manoj that ' Transfer and Legal Cost on purchase of property would be added to the Cost of Acquisition and then the Cost of Acquisition would be indexed'. I need following clarifications.
    a) How can I add these two costs and then index the sum because the costs are incurred in different financial years.
    b) In my case, the actual cost of acquisition is Rs. 7,11,400/- (paid through Demand Drafts and duly receipted by Army Welfare Hosuing) but the sale consideration value is Rs. 3,62,323/- for Stamp Duty purpose as cost of specific unit (presumably excluding the cost of common facilities). Which value I should take for indexation.
     
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