Tax Implications on Sale & Purchase of Property
Section 48 read with Section 50C read with Section 56(2)(x) read with Section 194IA of Income Tax Act, 1961 read with Income Tax Rules, 1962
Tax Implications on the Seller of Property:
Section 48- Computation of Capital Gain
Full Value of Consideration (Refer Section 50C Below) | XXXX |
Less: Expenses on Transfer Eg Brokerage | XXXX |
Net Consideration | XXXX |
Less: Indexed Cost of Acquisition (Refer 2nd Proviso to Section 148) | XXXX |
Less: Indexed Cost of Improvement (if any) | XXXX |
Less: Exemptions under Section 54 | XXXX |
LTCG | XXXX |
Full Value of Consideration= Stamp Duty Value OR 110 % of Sales Consideration (FA,2020) whichever is higher
Note: Stamp duty Value is taken as on date of Agreement if payment is received in prescribed modes (Prescribed Modes- Notification 8/2020 dated 29.01.2020)
Example
SDV= 120Lakh
Actual Consideration=100Lakh
110% of Actual Consideration= 110 Lakh
Full Value of Consideration= 120 Lakh
Cost of acquisition × Cost inflation index of the year of transfer of capital asset
Cost inflation index of the year of acquisition
Indexed cost of improvement is computed with the help of following formula :
Cost of improvement × Cost inflation index of the year of transfer of capital asset
Cost inflation index of the year of improvement
Continuing the same Example, lets see what is the Tax Implication on Buyer
Example
SDV= 120Lakh
Actual Consideration=100Lakh
110% of Actual Consideration= 110 Lakh
Full Value of Consideration= 120 Lakh
Tax Implications on the Buyer of Property
Compliances to be done
Section 56(2)(x) Taxation of Gifts
Taxable Income in the Hands of Buyer: Stamp Duty Value Less Consideration OR 50000(whichever is higher)
In Our Example,
Income from Other Sources of Buyer= 120 Lakh- 100 Lakh = 20 Lakh is Taxable under the head “Income from Other Sources“
Well Done!!!
Thanks
Well explained sir
Thanks