Capital gains

1. The cost price of any capital asset purchased on or before 31-3-1981, shall be taken as the market value as on 1-4-1981.

    The actal cost of acquisitionCOI (cost price) becomes irrelevant. The Market value as on 1-4-1981 is taken to be the  COI of the house.

2. The Cost of acquisition to the previous owner shall be taken as the cost of Acqisision to the present owner, if the present owner (you and your mother.) has inherrited the house from your father.

3. Any capital Asset which is sold  36 months afterthe date of its purchase,  is called a Long Term Capital Asset.

4 The Long Term Capital Gain - Net Consideration on transfer (sale) of the Long Term Asset MINUS INDEXED Cost of Acquisition

5. In this case supposing  ithe  Sale Consireation is taken as 50 Lakhs (Because it is not known in the Question) and COI being the market value as on 1-4-1981 is 2lakhs ( this also is not given), the Indexed COI shall be calculated on the basis of INDEX NUMBERs of the year 1981-82 =100 and that of the year of Transfer (sale) being F/Y 2011-12 =785.

6. LTCG= Net Consideration MINUS Indexed Cost Of Acqisision (50, 00, 000- 785/100 X 2, 00, 000)= 34, 70, 000. This is the LTCG on which the Capital Gain Tax @ 20% shall be 6, 86, 000 + Education Cess @ 3@ 20580 Total Tax Liability as Tax on LTCG shall be 7, 06, 580.

7. Now you should substitute the actual figures for

• Market Value as on 1-4-1981:
• Index numbers based on the year of Transfer:
• Net Cosideration:

8. If the Property inherrited by Two coparceners You and your Mother The Tax Liability shall be Shared Equally.

9. You can avoid/reduce your Tax liability if you purchase/ costruct the new residential house as per section 54 or 54F.

10. Hope I have tried to make things clear.

Your mother and you inherited the house property, from your father's mother, thru' ur father. Therefore the Capital Gains arising from its sale will be included in the Total Incomes of both of you, in equal shares.

As the house property had been with your predecessor ever since 1-1981, its  Cost of Acquistion will be its fair market value as on 1-4-1981, duly iIndexed fro the inflation.

Its Cost of Improvements will be the actual cost of its development,incurred by your father in 1994, again, indexed for the inflation.

From the Sale price you will be entitled to deduct -

i) the indexed Cost of Acquisiton, as stated above; and 

ii) the indexed Cost of improvements, as stated above. The balance Capital Gains will be equally assessable in the hands of your mother and you.

F

nice suggestions

good one:)

Thanks for the reply. It was helpful.

Joseph