Property Valuation for Capital Gain Tax
Case Study
I received a case of Property Valuation
Since I am a Registered Valuer –SFA but to serve the customer at one roof , we generally contact our fellow professionals to facilitate the customer
Silent features of the case are
-The Residential property is inherited to the customer in 1965
-The property is sold in 2021 for Rs 80000.00 ( Notional Value)
-The property purchased in 2021 for Rs 280000.00 ( Notional Value)
-Since the whole amount is invested in another residential property , the Capital Gain is NIL
-Question is that whether the valuation of the property is needed to value, still.
-On enquiry, I am informed that the valuation is required for 01.04.2001 to file the return
During the exercise, what I have learnt – is sharing for you.
Why needed the Valuation
1. Visa – Need Net worth certificate and Property Valuation
2. Bank Loan
3. Capital Gain Tax
4. Dispute in Property
5. Construction
6. Company Property sold / share
7. Inherited property – Property inherited from Father/Mother etc.
NOTIFIED COST INFLATION INDEX UNDER SECTION 48, EXPLANATION (V)
As per Notification no. 62/2022, dated 14-06-2022 following table should be used for the Cost Inflation Index:-
| Sl. No. | Financial Year | Cost Inflation Index |
| (1) | (2) | (3) |
| 1 | 2001-02 | 100 |
| 2 | 2002-03 | 105 |
| 3 | 2003-04 | 109 |
| 4 | 2004-05 | 113 |
| 5 | 2005-06 | 117 |
| 6 | 2006-07 | 122 |
| 7 | 2007-08 | 129 |
| 8 | 2008-09 | 137 |
| 9 | 2009-10 | 148 |
| 10 | 2010-11 | 167 |
| 11 | 2011-12 | 184 |
| 12 | 2012-13 | 200 |
| 13 | 2013-14 | 220 |
| 14 | 2014-15 | 240 |
| 15 | 2015-16 | 254 |
| 16 | 2016-17 | 264 |
| 17 | 2017-18 | 272 |
| 18 | 2018-19 | 280 |
| 19 | 2019-20 | 289 |
| 20 | 2020-21 | 301 |
| 21 | 2021-22 | 317 |
| 22 | 2022-23 | 331 |
Factors for Valuation of Property
1. Location – Corner, Highway, Roadside, Road Length Near Airport or Railway Station, Near Famous Mandir etc.
2. Lease or Free hold
3. GPA or Registry or Power or Attorney
4. Kuccha or Pucca Makan
5. Use of Property – whether rented or vacant
6. Types of Construction – Marble flooring, Built up area, Floor rise etc.
The list is illustrative only. Other factors may affect the valuation
Points for Valuation
1. Valuer should registered under Income Tax
2. Valuer should be registered with IBBI
3. Fair Market Value- should not be more than the Circle rate of 01.04.2001
4. If no Circle rate that Fair Market value may be any sum subject to the satisfaction of the Authorities
Kindly share on my mail the reply of three question:
1. Whether valuation is compulsory required as on 01.04.2001
2. If we take the valuation as the circle rate , it suffices
3. Customer has suggested that if we take the valuation as on 01.04.2001 as zero then whole the sale amount is treated as capital gain and exempt from the purchase of another property. But I suggest that it is not the correct way to deal with. Kindly comment on this also.
Author Bio
Whether valuation is compulsory required as on 01.04.2001 if building on land constructed on date
oct 2005 and all property land with building sold on date may 2023? or valuation as on date 01.04.2005 is valid?
You need to calculate the Notional Indexed Cost of acquisition as on 01-Apr-2001 to calculate the capital gain as the property has been sold in year 2021 (Inflation index has been revised by Income tax authorities in year 2018 as you mentioned above). Even though Capital Gain is exempted but still capital gain is to be calculated because there are further provisions as per income tax in which this calculated capital gain shall be applied if assessee purchased or constructed another asset or sold the purchased new asset with in 3 yrs etc.
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