Query on amount of tax

Hello,

First, you need to calculate the capital gain on the sale of the property of your grandmother.

Since the property was acquired before 2001, you need to get the valuation of the property as on 1st April 2001, which will be considered as your cost of acquisition as on 1st April 2001. Which then will be indexed up to next year( sale year), which will become your indexed cost of acquisition.

This indexed cost will be reduced from the sale proceeds of Rs. 28 Lakhs, the resultant figure would be your grandmother's Capita Gain, and she would be liable to tax on this amount only.

Now to get an exemption from this capital gain, she needs to invest the Capital Gain amount(i.e. 28 Lakhs minus Indexed Cost) in another house property within the next 2/3 years of sale. Therefore the amount of Rs. 15 Lakhs to be invested in another flat would be available for exemption, and if the capital gain amount comes upto Rs, 15 Lakhs, your grandmother won't be liable to pay any tax on the capital gain.

I hope that this answer satisfies your requirements. For further understanding, you can contact us directly or take a phone consultation.

Regards,

CA Hunny Badlani

While.computing the cost of acquisition you need to compute index cost of acquisition. And you can also add some Costs which you may have incurred for improvement. This revised costs needs to be adjusted for sales to arrive at capital gain 

Capital gain is not calculated in such a way.

Your capital gain won't be 13 lakh it would be sale price less indexed cost of acquisition.

For indexed cost of acquisition you need to find FMV on 01.04.01.

Yes investing in new house would save capital gain also you can invest in 54EC bonds.

I think you are not much aware about this capital gain and tax so I would suggest you to have a telephonic consultation so that I can guide you in a better way.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Dear Sir,

As per the details provided by you, below is the capital gain calculation:

Sale Consideration - 28,00,000
Less Indexed Cost of Acquisition - 

* In case of property acquired by the way of inheritance or gift before 2001 then in that case Cost of Acquisition will be the Fair Market Value as on 1st April 2001.

COA will be - Fair Market Value as on 1st April 2001/Index Rate of 2001 * Index Rate of 2020

Index Rate of 2001- Rs. 100

Index Rate of 2020- Rs. 289

Once the fair market value will be provided then only correct capital gain can be computed by subtracting Indexed COA from Sale Consideration.

Only after calculating the Capital Gain as prescribed above exemption of 15 lacs will be deducted and remaining will be taxable.

For full calculation please provide the approximate Fair Market Value of the Plot as on 1- April- 2001.

Thanks and Regards 

Divya Chugh 

- The capital gain in the hands of your grandmother will be long term capital gain which is taxable at special rate which is 20% after considering the threshold limit of Rs.3 lacs (in case of senior citizen). In case of LTCG, cost of acquisition gets indexed. 

- As the property was acquired through gift deed,cost of acquisition in the hands of your grandmother would be the actual cost incurred by your grandfather.

- The property was acquired by your grandfather before 01.04.2001 which is the base year for calculation of indexed cost of acquisition. Please obtain valuation report as on 01.04.2001 and compare the FMV or actual cost. Indexed the value which is higher for calculation of indexed COA. 

- In your question, you have not shared the COA or FMV without which it is not possible to calculate the capital gain.

- The calculation done by you is wrong. Cost of new property can not be deducted from the sale value of the old property to calculate the capital gain.

Hi,

You need to get the property values as on 1.4.2001 or take FMV of 1.4.2001.

Once you derive the FMV/registered value, then only capital gain will be calculated. 

Further, capital gain can be exempted if your mother is investing the capital gain amount in buying new house within 2/3 years. She needs to open a CGDS account and inform this in the return of income.

Dear Sir,

Hope you are doing well !!

As such date of acquisition falls prior to 1 April 2001, you have  a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as your cost of acquisition.

So, firstly you need to get the valuation report of property as on 01.04.2001.

After that you can calculate the indexed cost of acquisition, the following formula is to be used:

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.

You can take the benefit of indexation on cost of improvement. 

To calculate the indexed cost of acquisition, the following formula is to be used:

Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation of the year of improvement.

If you need any further assistance, you can take a phone consultation for detail discussion.