Capital Gain on property
Querist :
Anonymous
(Querist) 28 March 2011
This query is : Resolved
ISSUE
My father was allotted a house on a piece of land measuring 200 sq. yrds in the year 1953 by Delhi Govt when he migrated from Pakistan. Some improvement was done on the house in the year 1970 and a kacha first floor was created.
Recently during the financial year 2010-11 he decided to reconstruct the house and make it a four storey building with Slit parking and made following arrangements.
That initially he will retain two floors namely Ground and First Floor building.
That Roof rights of First Floor with 1/4th share in undivided land without Roof rights for further floors are sold for Rs. 35.00 Lacs to a known person of the builder.
That Roof Rights of IInd Floor with further rights up to sky and 1/4th share in the undivided land for (a) Rs. 5.00 Lacs and (b) construction of Ground and First Floor with certain specifications those are estimated to be valued at Rs. 30.00 Lacs as per application submitted to MCD. The construction will get completed in an years time.
Money received was invested in REC Capital Bonds with in six months from the date of receipt.
Now he plans to retain only Ground Floor and sell First Floor with 1/4th share in the undivided land.
I need help to kindly enlighten me on the following issues.
From Income Tax angle
How the capital gain will be calculated in respect of Roof Rights of IInd Floor
How capital gains will be calculated in respect of proposed sale of First Floor. What will be its acquisition cost and what will be its date of acquisition to decide on Long Term or Short term Capital Gain.
Will there be any change in the status if the Proposed First Floor is sold before virtual completion of the construction or issue of Completion Certificate by a competent authority.
From Sale of Property angle.
What will be sale consideration for the property to be registered on which the duty is to be paid (a) in respect of the Roof Rights of First floor, (b) in respect of IInd Floor and (c) in respect of proposed First floor sale.
Any suggestion to include any particular clause in the agreement or on the timings to save on Taxes and Stamp duties before they are registered.
R.Ramachandran
(Expert) 28 March 2011
The Capital Gains is derived by deducting from the sale consideration the indexed cost of acquisition and indexed cost of improvement.
Since indexation is available only w.e.f. 1.4.1981, for the period prior to that first the fair market value of the property in question as on 1.4.1981 is to be ascertained through an Approved Valuer. After ascertaining the fair market value as on 1.4.1981, indexation can be applied to arrive at the indexed cost of acquisition of the property.
It will be advisable for you to approach a Chartered Accountant for arriving at the exact Capital Gains, and also an advocate for appropriate drafting fo the agreement.
