Capital gains: how reckoned?
I have purchased a three bedroom duplex flat from a co-operative house building society in Delhi in 1983 for a down payment of Rs. 2.50 lakh. The instalments in the next eight years add up to about Rs. 4.50 lakh, in all Rs. 7 lakh. On getting possession of the flat in 1988, I have also spent about Rs. 2 lakh for inevitable work for cupboards, kitchen fittings, grills, toilet fixtures, coverings for balconies and the like. I sold the flat for Rs. 32 lakh in August 2008.
I would like to be advised whether the entire payment, both the down payment and instalments, could be taken into consideration as cost. If so, how is the indexation worked out for instalments? Whether additions made by me will count as cost? I have paid interest to the co-operative society for having granted me instalments which works out to Rs. 1.20 lakh. Will this also count as cost?
The cost of the flat should be taken to include the amount paid by way of instalments.
The cost incurred on additions by the reader will be cost of improvement, which is also reckoned as cost in calculating capital gains. Interest paid for acquiring the flat would be deductible in five years from the date of possession, subject to limits in respect of self-occupied property. If it had not been so claimed, interest paid could be treated as cost of improvement. It appears that possession was given only in March 1989, so that it would be treated as the date of purchase, unless registration had taken place earlier. Indexation should be available from the year in which the property is registered or possession was taken, whichever is earlier.
The reader has probably overlooked the effect of Sec. 50C, which requires the value adopted for stamp duty purposes to be taken as sale price.
If the stamp value exceeds this amount, the reader should be alive to his right to contest either the stamp value or to have the value referred to the Valuation Officer (of the Department).
S. RAJARATNAM
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