How price of flat acquisition is calculated

I’m within the technique of promoting a property of carpet space 584.64 sq ft in Mumbai’s Oshiwara. I wish to know if I can add the next bills to the acquisition price. These embody brokerage for buying the flat bequeathed by my mom, prices for renovation carried out in 2001, repairs and upkeep price, stamp obligation and registration prices, probate prices  paid to the court docket. 

                               — Jagdish Shah

The listed price of acquisition of the asset could be calculated as the price of acquisition or honest market worth (FMV) as on 1 April 2001 / price inflation index (CII) of FY 2001-02 (i.e. 100)*CII of the yr of sale.

Further, if the precise sale consideration is decrease than the stamp obligation worth by greater than 10%, the stamp obligation worth could be thought to be the deemed sale consideration, for the aim of calculating such long-term capital acquire/ loss (LTCG/L).

As the property was bequeathed to you , the price of acquisition for you can be the associated fee to the earlier proprietor. Further, as per part 55 of the Income Tax Act, the price of acquisition of immovable property bought on or earlier than 1 April 2001 shall be the precise price of acquisition of such asset or the FMV of the property as on 1 April 2001, on the possibility of the taxpayer.

As per the details offered, it seems that the property was bought by your mom in 1993, nevertheless, it isn’t clear whether or not the property was transferred to you earlier than 1 April 2001. Assuming that the property was transferred to you after 1 April 2001, the price of acquisition of such asset in your palms shall be deemed to be the precise price of acquisition within the palms of your mom as elevated by the price of enchancment, incurred by you.

While computing the price of acquisition within the palms of your mom, it is advisable to examine the FMV (as prescribed) of the property as on 1 April 2001 vis-à-vis the precise price of acquisition (together with brokerage bills, stamp obligation prices, renovation, and many others. incurred earlier than 1 April 2001) and take into account the upper quantity as deemed price of acquisition within the palms of your mom, at your possibility. You could additional add the bills incurred by you put up 1 April 2001 in the direction of renovation and many others. (if leading to enchancment/alteration within the asset) as price of the advance. Since the definition of the time period ‘cost of improvement’ isn’t free from litigation, one must look into the details of the case intimately as as to whether the bills incurred for acquiring probate order had been resulting in any type of enchancment or not.

Also, it is advisable to have the suitable documentation in assist of the bills incurred for the property to contemplate the identical as the price of acquisition/enchancment.

It is to be famous that the restore and upkeep bills are usually thought of as routine bills for the maintenance of the property and will not be thought of as capital expenditure therefore not includable as the price of enchancment. Separately, you’re entitled to scale back the bills incurred for the switch of the property (together with brokerage bills) from the sale consideration to compute the taxable capital acquire revenue.

Parizad Sirwalla is accomplice and head, international mobility companies, tax, KPMG in India.

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