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ramtech

Tax on sale of ancestral land in telangana

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Hi friends

This query is regarding  taxation on sale of agricultural land in a village in telangana

My father has  inherited agricultural land from his father and his father from his father  .We dont know(today) whether it was purchased  or how it was acquired. Dont know the purchase price or cost of acquisition.Now my father wanted to sell it .

Now the question is..

FIRST POINT :

will the amount from the sale is taxable ?

To my information capital gain from the property is taxable( sale price - cost of acquisition). In this case selling price is known but 

how should we calculate acquition cost ?

SECOND POINT  :

Buyer's  version  : Difference between government value and selling value ( selling value is more than government value) is taxable.

 

Request  any  friend with the knowledge in taxation in telangana to help me clarify the above .This is little urgent

thanks in advance

Edited by ramtech
errors

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You mean that you don't have the legal documents (Registration deed) of the land? 

If so then you can approach the required authority to get the duplicate documents from the records.

Because AFAIK you just can't sell any property without showing ownership papers.

Because capital gains is calculated selling price - original price x index of today / index of the year of purchase.

If the period is less than 36 years then short-term capital gain otherwise long-term capital gain. I think this year (2017-2018) there was a proposal for changing the years to 24 instead of 36.

You can refer to the article below.

http://www.financialexpress.com/industry/banking-finance/capital-gains-tax-when-a-jointly-inherited-property-is-sold/279504/

Edited by LTE4G

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10 hours ago, LTE4G said:

You mean that you don't have the legal documents (Registration deed) of the land? 

If so then you can approach the required authority to get the duplicate documents from the records.

Because AFAIK you just can't sell any property without showing ownership papers.

Because capital gains is calculated selling price - original price x index of today / index of the year of purchase.

If the period is less than 36 years then short-term capital gain otherwise long-term capital gain. I think this year (2017-2018) there was a proposal for changing the years to 24 instead of 36.

You can refer to the article below.

http://www.financialexpress.com/industry/banking-finance/capital-gains-tax-when-a-jointly-inherited-property-is-sold/279504/

@ LTE/4g, sarvesh thanks for reply

we have ownership original documents, patta and passbook and also in revenue records clearly mentions.There is no problem with ownership establishment, they are 100% available and accurate.

The problem is how to calculate capital gain.As the property is inherited from ancesters very long  few decades or even more than that. It was not purchased then and there is not purchase value to calculate  capital gain.

Now the buyer is telling the  selling price minus government value  ( the difference ) is taxable.Is he correct ?

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7 hours ago, ramtech said:

Now the buyer is telling the  selling price minus government value  ( the difference ) is taxable.Is he correct ?

No. (It is Capital gain tax and is calculated on the basis of years - you get the benefit of "Cost Inflation Index" abbreviated as CII )

You can see the chart from 1981 to today from the following links ( Official PDF for capital gain is available at Income Tax site).

https://cadiary.org/cost-inflation-index-capital-gain/

http://wealth18.com/cost-inflation-index-chart-table-1981-to-2014-for-income-tax-capital-gain-purpose/

Suppose you don't have the actual Cost of Acquisition of the land then you can calculate on the basis of fair market value as on 1st April 1981 (Get the property valuation done by a Approved Registered Valuer as on 1st April 1981 and use it as COA).

So COA (Cost of Acquisition) = Fair Market Value as on 1st April 1981 + any other cost incurred thereafter for development etc.

Thereafter you can calculate by the formula :

Capital Gain = Sale Price - Indexed Cost of the Property (Further any expense occurred while selling can also be deducted such as brokerage & other expenses)

Indexed Cost of the Property = Actual COA x (Index in the year of Sale which is 2017 / Index in the Year of Purchase which is 1981 in your case)

So suppose the COA was ₹4 Lakh (as on 1-04-1981) & you sold the property for ₹50 Lakh ( Since the CII value is not yet announced for 2017-2018 we will consider that the property was sold in 2016-2017 i.e. Last year for our calculations)

Now the Indexed Cost of the Property = COA x (CII of 2016-17 / CII of 1981-82) = ₹4 Lakh x (1125 / 100) = ₹45 Lakh

So the Capital Gain = Sale Price - Indexed Cost of the Property = ₹50 Lakh - ₹45 Lakh = ₹5 Lakh

If the Seller of the property are more than one person then this gain would divide among them according to the share in the property.

So it has nothing to do with the Government value. The Government value is the minimum value fixed for the collection of Stamp Duty etc.

If you sell your property this year then you should use the CII of 2017-2018.

Hope this helps.

 

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May be - you don't have to pay any Capital Gain Tax.:D

Quote

The Supreme Court in the case of CIT v. B. C. Srinivasa Setty, 128 ITR 294, held that no capital gains tax is payable by an assessee where it was not possible to compute the capital gains u/s.48 of the Act. It held that capital gains could not be computed in cases where the cost of acquisition could not be conceived at all.

Read the full article here

Get in touch with some IT Lawyer & quote the above reference.

Edited by LTE4G

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If it is beyond 8 K.M from the Municipal limits there is no capital gains arising out of sale of agricultural lands.

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1 hour ago, nellorian said:

If it is beyond 8 K.M from the Municipal limits there is no capital gains arising out of sale of agricultural lands.

Yes you are right - I just missed "agricultural". 

@ramtech Read this

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@nellorian

@LTE4G

Thanks for reply.I consulted charter accountant. What you both have mentioned is absolutely correct

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