Date of acquisition for long term capital gain

Let us try to understand this with a simple example.

• An asset was purchased in FY 1996-97 for Rs. 2.50 lacs
• This asset was sold in FY 2004-05 for Rs. 4.50 lacs
• Cost Inflation Index in 1996-97 was 305 and in 2004-05 it was 480
• So, indexed cost of acquisition would be:

Rs. 2,50,000 * (480/305) = Rs. 3,93,443

Long Term Capital Gains would be calculated as => Capital Gains = Selling Price of an asset – Indexed Cost i.e. Rs. 450000 – Rs. 393443 = Rs. 56557. Therefore tax payable will be 20% of Rs. 56557 which comes to Rs. 11311.

Had it not been for indexation The Capital Gains tax would have been = Selling Price of an asset – Cost of acquisition i.e. Rs. 450000 – Rs. 250000 = Capital Gains is Rs. 200,000. Therefore tax payable @ 10% of Rs. 200000 would have come to Rs. 20,000.

Dear Mr Rama Chary

Thanks for your reply . Actually my question is regarding relevance of  the date of purchase of a property from a property builder which is not constructed / under construction for the purpose of date of acquisition . Whether the date of purchase is the date of booking the house on payment of booking amount or the date when the property has been transferred after completion of construction , through execution of sale deed . In a multi story aparment the time difference is more than three years from the date of booking of flat to the handing over of  physical  possession of flat.

Regards

KKAgrawal

Execution of sale deed date is to be consider. in your querry

 P&H High Court has held in the case of Mrs. Madhu Kaul Vs. CIT that identification of the flat or physical delivery of possession is  irrelevant as right to hold properly stands crystalised upon allotment. The allotment of a particular flat and delivery of its possession would relate back to the allotment. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.

source:www.tax guru.in march 2014