Query relating to Long Term Capital Gains and Computation thereof

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  1. AMAL CHOUDHURY

    AMAL CHOUDHURY New Member

    Hi All,

    Need your help in understanding the following issues :

    Brief history

    1. X purchased a plot of land jointly with other partners in September 2006 by investing Rs.3.00 lacs (X's contribution) for developing a multi-storied building.

    2. Due to some litigation, the project got held up for some time. Meanwhile, X entered into an MOU with a developer who agreed to complete the project and deliver a flat to each on completion.

    3. X deposited a further total sum of Rs.10.85 lacs in instalments during May 2010 to October 2010 for construction work.

    4. On completion of the project, a flat was allotted to X through lottery and possession was given in June 2011.

    5. Eventually, X got the property (flat) registered in February 2012 by a Deed of Gift (X being also a part-owner of the land). Stamp duty and registration cost spent RS.1.38 lacs. Govt. valuation of the flat for stamp duty and regn. was Rs.22.64 lacs

    6. On December 2014, X sold the flat at RS.25.00 lacs. Govt. valuation for stamp duty and registration of sale deed this time was Rs.43.06 lacs. The stamp duty and registration cost spent was Rs.3.49 lacs which was also incurred by X.

    Queries

    1. Which date should be considered as date of acquisition - a) September 2006 -date of purchase of land, b) June 2011 - date when possession was given or c) February 2012 - date of registration of the property ?
    2. Apart from Rs.13.85 lacs (land+construction), would the acquisition cost include Rs.1.38 lacs (registration+stamp)?
    3. What would be the full consideration value in the instant case? a) Rs.25.00 - actual sale proceeds or b)Rs.43.06 lacs - as per Govt. valuation.
    4. If answer to query no. 3 is (b), could the amount spent by X (for stamp duty and registration Rs.3.49 lacs) be deducted from consideration value (as cost of transfer) for computing CGT?
    5. In such case, would the amount of capital gain be computed (without indexing) as under:
    CG = (43.06-3.49) - (3.00 + 10.85 + 1.38)
    = 24.34
     
  2. Manoj Mehra

    Manoj Mehra Active Member

    1. The date of purchase of land would be considered as the date of acquisition
    2. Yes, the cost of acquisition will include the Registration and Stamp Duty Expense i.e. Rs. 1.38 Lakhs
    3. If the actual sale price is less than the govt valuation - the govt valuation is considered as the sale price. Therefore, in this case the govt valuation would be considered as the sale price.
    4. Yes, the expenses on transfer (if paid by seller) are always deducted while computing the capital gains
    5. Your computation of Capital Gains is correct.
     
  3. AMAL CHOUDHURY

    AMAL CHOUDHURY New Member

    Many thanks Mr Mehra for your prompt and valued response.
     
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