Computation of Capital Gains in Case of Immovable Property
Introduction
Capital gains from transferring immovable property (land, building, or both) are subject to special rules regarding computation, exemptions, and tax rates.
Key Provision
- Capital Gains Computation:
| Particulars | Amount |
| Full value of consideration (Higher of actual consideration and stamp duty value) | xxx |
| Less: | |
| (a) Cost of acquisition | (xxx) |
| (b) Cost of improvement | (xxx) |
| (c) Expenditure in connection with transfer | (xxx) |
| (d) Capital gains taxable under section 45(4), which is attributable to the capital asset remaining with the firm, AOP or BOI after reconstitution | (xxx) |
| Less: | |
| (a) Exemption under Section 54B to 54GB | (xxx) |
| Short-term capital gains or Long-term capital gains | xxx |
- Classification of Capital Gains:
- Short-term: Held for less than 24 monthsbefore transfer.
- Long-term: Held for 24 months or morebefore transfer.
Special Provision
- Full Value of Consideration (Section 50C):
- If SDV (Stamp Duty Value) exceeds actual consideration by more than 10%, SDV is deemed the full value.
- Disputes may be referred to a Valuation Officer.
- Cost of Acquisition:
- For assets acquired prior to 01-04-2001, the cost of acquisition shall be taken as the higher of the actual purchase price or the FMV as on 01-04-2001, subject to the condition that such FMV does not exceed the SDV as on 01-04-2001.
- Deductions for interest claimed under Sections 24(b), 80EE, or 80EEAare not allowed.
- Cost of Improvement:
Includes capital expenditure on or after 01-04-2001; prior improvements are ignored.
- Cost of Improvement:
Tax Rates and Indexation
- LTCG are taxed at 5%(without indexation).
- Resident individuals and HUFs can apply the grandfathering provision for land/buildings acquired before 23-07-2024, opting for 20% tax with indexation if more beneficial.
- Short-term gains are taxed at the assessee’s applicable rates.
Exemptions (Sections 54 to 54GB)
- Exemptions apply for investments in new assets like residential properties, agricultural land, bonds, or shares, based on specific conditions and timelines.
- Special exemptions include:
- Section 10(37): Compulsory acquisition of urban agricultural land.
- Section 10(37A): Andhra Pradesh land pooling schemes.