LONG TERM CAPITAL GAINS - HOUSING PROPERTY

I owned a plot in chennai. Constructed a house in 1989. made improvements over the period. demolished the house in 2009. Entered into a JV for constructing flat. As per JV, got 2 flats + amount. Questions: 1) Can Indexed cost of construction of the earlier house, improvement, demolishion can be taken into account for arriving at capital gains. 2) Can Exemption be claimed for the 2nd Flat in the same building (1 in GF & another in 2nd Flr.) based on Rattanchand Murerka V Jt.CIT decided by the Mumbai Tribunal, Bench D on 12/9/01. 3) If capital Gain is calculated WITHOUT indexation, liability becomes less. Is there any clause to calculate LTCG (HOUSE PROPERTY) without indexation for Housing Property. Please help me out ASAP.

asked Feb 24 '11 at 02:04 by SAIDAIGANESAN 1111


1.Yes, you can include all improvement amount (spent over the years) on the house in purchase cost. But indexation cost has to counted for the same year.

Say, initial purchase cost of plot = C1
purchase year of plot = Y1, CII (cost inflation index) in year Y1 = I1
construction cost of house, in 1989 = C2
construction year, Y2 = 1989, CII in year Y2 = I2
alteration/improvement cost of house in Year Y3 = C3
CII in year Y2 = I3
Sale year, Y4 = 2009, CII in year Y4 = I4

Total cost after indexation= C1 * (I4/I1) + C2 * (I4/I2) + C3 * (I4/I3)

2.Exemption cannot be claimed for more than one flat. Also capital gain will be computed in this case with a different system.

Lets say builder will be retaining one flat after handing over 2 flats plus some amount to you. Effectively, you are transferring 33 per cent of undivided share in the land to the builder as a consideration for 2 flats which he will be constructing for you. We have to compute capital gains in respect of transfer of 33 per cent undivided share of land. The sale consideration to be adopted would be Amount plus the cost of construction incurred by the builder for completing the 2 flats to be handed over to you. For example, if the cost of construction of each flat is Rs.20 Lakhs, the total sale consideration would be Rs.40,00,000 + Plus cash amount. From this you are entitled to deduct indexed cost of acquisition of land.

3.For capital gain computation on sale of property, only indexation rules apply.

answered Mar 01 '11 at 11:31 by pankaj 5.2k320

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Asked: Feb 24 '11 at 02:04

Seen: 1,756 times

Last updated: Mar 01 '11 at 11:31