CAPITAL GAIN (LAND & BUILDING)

Capital Assets [Section 2(14)]

(a) Property of any kind held by assesse, whether or not connected with business or profession.

(b) Any securities held by Foreign Institutional Investor (FII) which has invested in such securities as per SEBI regulations but does not include:

1. Any stock-in-trade [other than securities referred to in sub-clause (b)]

2. Personal Effects

i. Movable property (including wearing apparel & furniture)

ii. for personal use of

iii. assessee or for dependent family member.

3. Agricultural Land in India situated in RURAL AREA. 

Following types of Agricultural Lands are Capital Assets:

a) Agricultural Land situated in Urban area of India

b) Agricultural land situated outside India

Capital Gain

Urban Area [section 2(1A)]

(a) Any area within the Jurisdiction of a municipality /Municipal corporation/cantonment board and which has a population of atleast 10,000 OR

(b) Any area within the distance, measured aerially,

(I) Upto 2 kms from local limits of above jurisdiction having population > 10,000 but upto 1,00,000 or

(II) Upto 6 kms from local limits of above jurisdiction having population > 1,00,000 but upto 10,00,000 or

(III) Upto 8 kms, from the local limits of above jurisdiction having population of > 10,00,000.

Personal effects excludes the following: i.e. Following are treated as Capital Assets.

a. Jewellery

b. Archaeological collections

c. Drawings

d. Paintings

e. Sculptures

f. Any work of art

Type of Capital Gain and Duration : (Land or Building or Both)

Held for a period upto 24 Months preceding date of transfer Short Term Capital Assets (STCA) Short Term Capital Gain (STCG)
Held for a period more than 24 months preceding date of transfer Long Term Capital Assets (LTCA) Long Term Capital Gain (LTCG)

The Land / Building received in gift, then the period of holding will include period of holding of previous owner.

Computation of Capital Gain [Section 48]

Long Term Capital Gain Short Term Capital Gain
Full Value of Consideration Less: Expenditure incurred Full Value of Consideration

Less: Expenditure incurred

Indexed Cost of Acquisition of LTCA

Indexed Cost of Improvement of LTCA

Cost of Acquisition of STCA

Cost of Improvement of STCA

Full value of Consideration for land / Building [Section 50C]: 

Sale consideration / Full value of consideration on transfer of Land or Building or both is less then Stamp Value (Jantri Value), then the stamp value so assessed shall be deemed to be Full value of Consideration.

Stamp value does not exceed 105% of consideration received, then the consideration received shall be deemed to Full Value of Consideration.

Indexed Cost of Acquisition
Cost of Acquisition of Capital Assets X Cost Inflation Index

(of FY in which Assets Transferred)

Cost Inflation Index

(of the 1st FY in which asset held by Assessee) or (of FY 2001-02),whichever is later

Indexed Cost of Improvement
Cost of Improvement of Capital Assets X Cost Inflation Index

(of FY in which Assets Transferred)

Cost Inflation Index

(of the FY in which improvement has taken place by Assessee or/and Previous Owner)

Cost of Acquisition [Section 55(2)]:

1) If Land / building purchased prior to 01/04/2001, then the original cost of acquisition / FMV as on 01/04/2001, whichever is higher.

2) If Land / building purchased after 01/04/2001, then the original cost of acquisition.

3) If land / building received in gift then the Cost of Previous owner who had actually purchased the capital assets. [Section 49(1)].

Cost of Improvement [Section 55(1)]:

All capital expenditure incurred by on improvement of Capital Assets on or after 01/04/2001.

INCOME EXEMPT FROM COMPULSORY ACQUISITION OF LAND [SECTION 10(37)] 

> Individual or HUF

>  Compulsory acquisition of urban agricultural land (LTCA or STCA)

>  Used for 2 yrs before date of transfer of agricultural purposes by individual/his parents/HUF

>  Compensation received shall be exempt from capital gains

Rate of Tax on Capital Gain:

>  Tax on STCG is charged @ normal rate of tax which is determined on the basis of the total taxable income of the taxpayer.

>  Tax on STCG is charged @ 10% (plus surcharge and cess as applicable) if STCG covered u/s 111A i.e. STCg arising on transfer of equity shares or units of EOMF or units of Business Trust through recognised stock exchange in India.

>  Tax on LTCG is charged @ 20% (plus surcharge and cess as applicable)

>  Tax on LTCG is charges @ 10% (plus surcharge and cess as applicable)

√ LTCG arising from sale of listed securities and it exceed Rs.1,00,000/- [Section 112A].

√  LTCG arising on transfer of Any securities listed in recognised stock exchange in India, Any units of UTI or MF (whether listed or not) and Zero Coupon Bond.

Exemption from Capital Gain:

Section 54: Transfer of Residential Property 54B: Transfer of Agriculture Property 54EC: Transfer of LTCA
Assessee Individual / HUF Individual / HUF Any Assessee
Capital Assets Transferred Residential House Urban agriculture land used by assesse / parent for agricultural for minimum 2 years prior to transfer Land or building or both
Nature of Capital Assets LTCA STCA or LTCA LTCA
New Assets One Residential House in India Agriculture Land (Any Area) Bonds Redeemable after 5 years  (NHAI, RECI, PFCL, IRFCL) Max. Investment Rs.50 lacs
Time Period of New Assets Within 1 year before and within 2 year after transfer or construct within 3 year after transfer Within 2 year after transfer Within 6 month of transfer
Capital Gain Account Scheme (CGAS) Deposit in CAGS on or before due date of Return (DDR)  u/s 139(1) Deposit in CAGS on or before due date of Return u/s 139(1) NA
Exemption LTCG invested in New Assets + deposited in CGAS upto DDR LTCG invested in New Assets + deposited in CGAS upto DDR LTCG invested in Specified bonds upto 6 month of Transfer
Transfer of New Assets If New Asset transferred within 3 years from date of purchase/ construction, then Cost of acquisition of new asset Reduced by Capital Gain exempted earlier If New Asset transferred within 3 years from date of purchase/ construction, then Cost of acquisition of new asset Reduced by Capital Gain exempted earlier If New Asset is transferred or converted into money within 5 years from date of acquisition., then exempt LTCG taxable in p/y of transfer/ conversion of new asset

Exemption from capital Gain:

Section 54EE: Investment in units of specified funds 54F: Transfer of LTCA
Assessee Any Assessee Individual or HUF
Capital Assets Transferred Any Capital Assets Any Capital Assets (Other than Residential House)
Nature of Capital Assets LTCA LTCA
New Assets Units of Start up fund Max. investment Rs.50 Lacs Residential House
Time Period of New Assets Within 6 month of transfer Purchased 1 year before or within 2 yrs after transfer or constructed within 3 yrs after transfer One Residential house in India
Capital Gain Account Scheme (CGAS) NA Deposit in CAGS on or before due date of Return (DDR)  u/s 139(1)
Exemption LTCG invested in Specified bonds upto 6 month of Transfer (Cost of New Assets + LTCG X Amt. deposited in CGAS)

Net Consideration

Transfer of New Assets If New Asset is transferred or converted into money within 3 years from date of acquisition., then exempt LTCG taxable in p/y of transfer/ conversion of new asset If New Asset t/f within 3 yrs from date of purchase/ construction, then

Exempt Capital Gains taxable in P/Y of transfer of new asset.

Exemption from capital Gain:

Section 54D : Compulsory Acquisition of Land & Building 54G : Transfer under shifting of Industrial Undertaking 54GA: Transfer of industrial undertaking to SEZ
Assessee Any Assessee Any Assessee Any Assessee
Capital Assets Transferred Compulsory acquisition of Land & Building used for Industrial undertaking in Any Area Plant & Machinery / Land & Building used for Industrial undertaking in Urban Area Plant & Machinery / Land & Building used for Industrial undertaking in Urban Area
Nature of Capital Assets STCA or LTCA STCA or LTCA STCA or LTCA
Conditions Used by Assessee for Business for 2 years immediately prior to date of acquisition.

Above undertaking shifted (in any area)

Above undertaking shifted (to rural area) Above undertaking shifted (in any area)
New Assets

 

Purchase/ Construction of  Other Land/Building Purchase Plant/Machinery , Purchase /Construct Land/ Building, Including expenses on transfer Purchase Plant/Machinery, Purchase /Construct Land/ Building, Including expenses on transfer
Time Period of New Assets Within 3 years after transfer 1 year before or within 3 years of transfer 1 year before or within 3 years of transfer
Capital Gain Account Scheme (CGAS) Deposit in CAGS on or before due date of Return (DDR)  u/s 139(1) Deposit in CAGS on or before due date of Return (DDR)  u/s 139(1) Deposit in CAGS on or before due date of Return (DDR)  u/s 139(1)
Exemption LTCG invested in New Assets + deposited in CGAS upto DDR LTCG invested in New Assets + deposited in CGAS upto DDR LTCG invested in New Assets + deposited in CGAS upto DDR
Transfer of New Assets If New Asset transferred within 3 years from date of purchase/ construction, then Cost of acquisition of new asset Reduced by Capital Gain exempted earlier If New Asset transferred within 3 years from date of purchase/ construction, then Cost of acquisition of new asset Reduced by Capital Gain exempted earlier If New Asset transferred within 3 years from date of purchase/ construction, then Cost of acquisition of new asset Reduced by Capital Gain exempted earlier

Author Bio

Qualification: CA in Practice
Company: CA AMAR GIRISHKUMAR OZA
Location: JAMNAGAR, Gujarat, IN
Member Since: 31 Jul 2020 | Total Posts: 4

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