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"Computation Of Capital Gains In Real Estate Transactions"

The Finance Act, 2002 had, with effect from the AY 2002, inserted a new Section 50C in the Income Tax Act, 1961, to make a special provision for determining the full value of consideration in cases of transfer of immovable property. This provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both is less than the value adopted or assessed by any authority of the State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed would be deemed to be the full value of the consideration, and the capital gains would be computed accordingly under Section 48 of the I.T. Act.

It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with Section 55A of the Income Tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration.

 

However, if the fair market determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer would not adopt such fair market value and would take the full value of consideration to be the value adopted or assessed for stamp duty purposes.

 

It is also provided that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made would be amended to re-compute the capital gains by taking the revised value as the full value of consideration.

 

As per the Finance (No. 2) Act 2009 w.e.f. the financial year 2009-2010 in the above definition for the word “assessed” the words “assessed or assessable” have been substituted. Merely with the change of this word there would arise more responsibility on the tax payers to correctly compute the capital gains tax liability.

 

As a result of this amendment, the transactions which are not registered with the stamp duty valuation authority would also be covered. Thus, where the property transactions are undertaken through power of attorney or agreement to sell, then such transactions would also be covered within the ambit of Section 50C of the Income Tax Act, 1961.
 

Related Topics....Under the head 'Capital Gain'

Capital Assets, Capital Gain & Transfer of Capital Assets for Taxation of 'Capital Gain'
Types of Capital Assets for Computing ‘Capital Gain’
Computation Of ‘Period Of Holding of an Asset' for Computing Gapital Gain [Explanation 1(i) to Section 2(42A)]
Transfer Of A Capital Asset [Section 2(47)] for Computing Capital Gain
Transactions Not regarded as ‘Transfer’ for Computing Capital Gain [Section 46 and 47]
Method of Computing Capital Gain [Section 48]
Deemed Cost of Acquisition of Asset for Computing Capital Gain
[Section 55(2)] : Cost of Acquisiton of Assets for Computation of Capital Gain
Capital Gains Accounts Scheme, 1988.
Types of Capital Gain
Tax on Long-Term Capital Gain in certain Cases (Section 112A)
Exemption of Capital Gains under Section 10 and 115JG

Exemption of Capital Gains under Sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GB anf 54H

(Section 54) : Exemption of Capital Gains from the Transfer of Residential House Property
(Section 54B) : Exemption of Capital Gain on Transfer of Land used for Agricultural Purposes
(Section 54D) : Exemption of Capital Gains on Compulsory Acquisition Of Land And Buildings forming part of Industrial Undertaking
(Section-54EC) : Exemption of Capital Gain on Transfer of any Long Term Capital Asset on the basis of Investment in certain Bonds
(Section 54EE) : Capital Gain not to be charged on Investment in Units of a Specified Fund
[Section 54F] : Exemption of Capital Gain on Transfer Of Long-Term Capital Assets other than a House Property
[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas :
[Section 54GA] : Exemption of Capital Gain on transfer of assets in case of shifting of Industrial Undertaking from an urban area to any Special Economic Zone (SEZ)
(Section 54GB) : Exemption of Long term Capital Gain Tax on Transfer of Residential Property if Net Consideration is Invested in the Equity Shares of a new Start-up SME Company :
(Section 54H) : Extension of time limit for acquiring new Asset or Depositing or Investing amount of Capital Gain, in case of Compulsory Acquisition :

Capital Gain in various Special Cases - How to Find Out or Calculate

  1. Capital Gain from Zero Coupon Bonds

  2. Capital Gain in case of amount Received from an Insurer on account of Damage or Destruction of any Capital Asset [Section 45(1A)]:

  3. Capital Gain in the case of Transfer of Depreciable Assets [Section 50] -

  4. Capital Gain on Conversion of Capital Asset into Stock-in-Trade [Section 45(2)]-

  5. Capital Gain on Transfer of Capital Asset by a Partner/Memeber to a Firm/AOP/BOI as Capital contribution [Section 45(3)]-

  6. Capital Gain on Distribution of Capital Assets by a Firm, AOP/BOI to Partners at the time of Dissolution [Section 45(4)]-

  7. Capital Gain on Compulsory Acquisition of a Capital Asset [Section 45(5)]-

  8. Computation of Capital Gains in case of Joint Development Agreement [Section 45(5A)] [W.e.f. A.Y. 2018-19]

  9. Capital Gain on Conversion of Debentures / Bonds into Shares [Section 47(x), 49(2A) and rule 8AA] :

  10. Capital Gain on Transfer of Shares / Debentures in the hands of Non-Residents (Proviso 1 to Section 48 and Rule 115A) :

  11. Capital Gain on Transfer of Self-Generated Capital Assets :

  12. Capital Gain on Transfer of Bonus Shares -

  13. Capital Gain on Transfer of Right Entitlement -

  14. Capital Gain on Transfer of Securities in Demat Form -

  15. Capital Gains on Distribution of Assets by Companies in Liquidation [Section 46]:

  16. Computation of Capital Gains in the case of Transfer of Land and Building or in Real Estate Transactions [Section 50C] -

  17. Capital Gains on Purchase by Company of its Own Shares or Other Specified Securities [Section 46A]:

  18. Capital Gain on Sale of Land and Building to be computed separately in case of Building Constructed by the Assessee:

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