Calculate LTCG/L of an previous asset utilizing FMV
I’m a feminine senior citizen. I had purchased a 248 sq. ft industrial condo in a DDA leasehold constructed industrial constructing from the primary proprietor in May 1994 for ₹2.2 lakh. Now, I intend to promote the identical at an anticipated worth of ₹25 lakh. While doing so, I anticipate to incur a brokerage payment of two%, DDA switch payment at ₹5 per sq. ft and a potential switch endorsement payment by the builder to the second switch @ 5% of the sale deed. What would be the valuation of the property as of 1 April 2001 (as is required for a property purchased earlier than 2001) and thereafter its valuation as in FY22 as per the present indexation desk? What can be the price of acquisition of the property and thereafter, computation of capital acquire and potential tax or to put money into 54EC bonds to keep away from tax?
—Urmila Ok.
It is assumed that you simply personal the industrial property, and it isn’t acquired by you beneath a lease association. As the immovable property was held by you for greater than 24 months, the asset shall be thought-about as a long-term capital asset and the features/losses arising out of the sale could be taxable as long-term capital features or loss (LTCG/L).
LTCG/L is calculated because the distinction between internet sale consideration (precise sale consideration much less brokerage and incidental promoting bills) and the listed price of acquisition and enchancment.
Where a capital asset is bought previous to 1 April 2001 (i.e. in May 1994), the price of such asset for the aim of calculating LTCG/L on sale may be substituted with the honest market worth (FMV) of the asset, as on 1 April 2001, on the possibility of the assessee. You could due to this fact get a valuation of the capital asset executed as on 1 April 2001 and use both such FMV or the precise buy price at your discretion. While there isn’t a categorical requirement to acquire an FMV certificates, from a documentation perspective one ought to take into account acquiring such a certificates from a registered valuer. It needs to be famous that, as per the Finance Act 2020, such FMV can’t exceed the stamp responsibility worth as on that date.
The listed price of acquisition of the industrial property could be calculated as:
Cost of acquisition (i.e. ₹2.2 lakh) or FMV as on 1 April 2001 (at your possibility) / price inflation index (CII) of FY02 (i.e. 100) x CII of 12 months of sale (CII prescribed for FY22 is 317). Further, if the precise sale consideration is decrease than the stamp responsibility worth by greater than 10%, the stamp responsibility worth could be thought to be the deemed sale consideration, for the aim of calculating such LTCG/L.
The tax is payable at 20% (plus relevant surcharge and cess) on the ensuing LTCG.
A rollover exemption of the ensuing LTCG, if any, on sale of economic property (apart from residential home) is out there in direction of the next investments, topic to the prescribed situations and timelines: Under Section 54EC of the Act, by investing the LTCG in specified notified bonds inside six months from the date of sale; Under Section 54F of the Act, by investing the online consideration in a brand new residential home situated in India.
Accordingly, within the immediate case, it’s possible you’ll select to take a position the LTCG, if any, in notified bonds within the prescribed method and declare exemption in direction of the LTCG, if any.
Parizad Sirwalla is companion and head, international mobility companies, tax, KPMG in India.
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