Capital gain on house sale
Gulshan
(Querist) 26 February 2013
This query is : Resolved
Hi,
i booked a apartment in August 2007 with downpayment plan(40% self paid, 60% finance) and got the possession in 2009 and get registry done. This month feb 2012 i sold this flat. Now after lots of netsearches and comments from my CA friend, i am confused that how to calculate LTCG. Should i take allotment year or registry year to calculate cost indexation?
Thanks in advance. Please advice.
Gulshan
(Querist) 26 February 2013
Also, will the interest paid to bank will be considered to calculate LTCG. Please advice.
C. P. CHUGH
(Expert) 26 February 2013
Dear Gulshan,
Cost of Acquisition in this case shall be the value for which it was allotted in 2007 and same is to be indexed from that year. MTCG shall be Sales Relisation-Indexed Cost of acquisition as calculated above, Tan on LTCG shall be payable @20% on such LTCG.
Thanks
Gulshan
(Querist) 26 February 2013
Thanks Sir,
i have one more doubt. Will the interest paid to bank should be considered for calculation of cost indexation. THanks.
C. P. CHUGH
(Expert) 27 February 2013
Dear Gulshan, In case you go by the option i provided earlier, i am afraid you would not be allowed to capitalise interest towards cost and get indexation benefit for a simple reason when you are indexing entire cost (Paid+Unpaid) from the year of allottment, any payment made towards interest on deferred payment arrangement is between you and the financier and allowing its capitalisation would amount to double indexation which the law does not permit.
You may either index the cost as and when paid on year to year basis together with interest or entire cost from the initial year. Choice is yours.
Thanks
Gulshan
(Querist) 27 February 2013
Thanks Chugh Sir... your answer make sense to me. i will go by first option and will not account interest paid to bank. Thanks once again.
R.V.RAO
(Expert) 21 February 2014
sorry for a late reply.
it is now well settled by punjab and haryana high court and also CBDT VIEW that date of allotment or allotment letter date is the date from when calculation of 3 year capital gain period is done.
R.V.RAO
(Expert) 01 March 2014
as to double claim of interest on borrowed money, it stands to logic,that an assessee cannot claim interest on borrowed money as deduction in computing income from house property and again include the same for arriving at indexced cost of acquisition.
but a surprising judgement was delivered by ITAT -CHENNAI THAT INTEREST DEDUCTION UNDER SEC 24 IS NOT A BAR FOR CLAIMING INTEREST AS A COST AND INCLUDE THE SAME FOR COST INDEXATION,AS THIS WAS U/S 48 CAPITAL GAIN COMPUTATION.SO DOUBLE DEDUCTIO CAN BE CLAIMED BY AN ASSESSEE.THERE IS NO BAR.
C. P. CHUGH
(Expert) 02 March 2014
Let none be confused by the ITAT judgement. What was the issue for adjudication before the Ld ITAT is whether interest paid on borrowed capital can be claimed as deduction under section 24 and also could be added to the cost of acquisition to compute indexed cost. I had made it absolutely clear that one can claim indexation of cost paid with interest on year to year basis irrespective of his claiming deduction under section 24 on account of interest, but however i am still of the opinion where you are claiming indexation of entire cost from day one, whether paid or unpaid, it make sense not to claim indexation of interest paid later on.
