CAPITAL GAIN TAX

sunil (Querist) 21 April 2011 This query is : Resolved
I PURCHASED PLOT OF LAND IN DEC 2009 PRICE 3,45,000=00.
SAME I SOLD IN MARCH 2011 FOR RS. 6,00,000=00.
THIS WAS DONE TO PURCHASE SMALL PLOT FOR RS. 3,00,000=00 AND CONSTUCT HOUSE. PLOT WAS PURCHASED IN APRIL 2011. AND CONSTRUCTION WILL BE COMPLETED IN ONE YEAR.
WILL I HAVE TO PAY CAPITAL GAIN TAX? COST OF CONSTRUCTION IS APPROX. 10,000,00=00

SUNITA

Follow Query

Report Abuse

R.Ramachandran (Expert) 21 April 2011
Even assuming (without applying the indexed cost of acquisition) that the entire difference i.e. 6 lakhs minus 3.45 Lakhs is your capital gains, you have already bought a plot for Rs. 3 lakhs (which is greater than the amount of capital gains). Therefore, you will have no capital gains tax liability at all.

A V Vishal (Expert) 21 April 2011
Mr R.R

Don't you think it is Short term gain since the land was bought in 2009 and sold in 2011 (less than 36 months), so indexation or no indexation benefits of exemption is not available (except in case of 54B, 54D or 54G

R.Ramachandran (Expert) 21 April 2011
Dear Mr. Vishal,
Yes. Thanks for pointing out. I just overlooked the fact that the plot was purchased only in December 2009. Therefore there will be no exemption from payment of tax on the gains made.
Dear Mr. Sunil, Pl. note.
Exemption is available only in respect of long term capital gains, subject to certain conditions. In your case, it is not a long term capital gain. Therefore there will be no exemption from payment of tax. You have to pay tax on the entire gain.

Anil Kumar-Advocate (Expert) 22 April 2011
The short term capital gain is calculated in the manner as follws:
01.Find out the full value of consideration.
02.Deduct the following:
a.Exclusive Expenditure incurred by you during transfer of such property.
b.Cost of acquisition,
c.Cost of improvement(here you can play a game for lawful avaoidence of tax).
03. From the resulting sum deduct the exemption provided by sections 54B,54D,54G & 54GA(be caution while taking exemption as such take help of your local expert).
04. The balance (residue) amount is taxable under short term Capital gain.