Calculate LTCG/L of an outdated asset utilizing FMV

I’m a feminine senior citizen. I had purchased a 248 sq. ft business condominium in a DDA leasehold constructed business constructing from the primary proprietor in Could 1994 for 2.2 lakh. Now, I intend to promote the identical at an anticipated worth of 25 lakh. Whereas doing so, I count on to incur a brokerage charge of two%, DDA switch charge at 5 per sq. ft and a doable switch endorsement charge 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 will probably be the price of acquisition of the property and thereafter, computation of capital achieve and doable tax or to spend money on 54EC bonds to keep away from tax?

—Urmila Ok.


It’s assumed that you just personal the business property, and it isn’t acquired by you underneath a lease association. Because 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 positive factors/losses arising out of the sale could be taxable as long-term capital positive factors or loss (LTCG/L).

LTCG/L is calculated because the distinction between web sale consideration (precise sale consideration much less brokerage and incidental promoting bills) and the listed price of acquisition and enchancment.

The place a capital asset is bought previous to 1 April 2001 (i.e. in Could 1994), the price of such asset for the aim of calculating LTCG/L on sale could be substituted with the truthful market worth (FMV) of the asset, as on 1 April 2001, on the choice of the assessee. You might due to this fact get a valuation of the capital asset accomplished as on 1 April 2001 and use both such FMV or the precise buy price at your discretion. Whereas there isn’t any specific requirement to acquire an FMV certificates, from a documentation perspective one ought to think about acquiring such a certificates from a registered valuer. It needs to be famous that, as per the Finance Act 2020, such FMV can not exceed the stamp obligation worth as on that date.

The listed price of acquisition of the business property could be calculated as:

Price of acquisition (i.e. 2.2 lakh) or FMV as on 1 April 2001 (at your choice) / price inflation index (CII) of FY02 (i.e. 100) x CII of yr of sale (CII prescribed for FY22 is 317). Additional, 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 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 business property (apart from residential home) is offered in direction of the next investments, topic to the prescribed situations and timelines: Underneath Part 54EC of the Act, by investing the LTCG in specified notified bonds inside six months from the date of sale; Underneath Part 54F of the Act, by investing the web consideration in a brand new residential home situated in India.

Accordingly, within the instantaneous case, you could 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, world mobility companies, tax, KPMG in India.

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