My grandfather aquired a property in Mumbai in 1940s. thereafter after my grandfathers and fathers?



death the property came to me and my three brothers.now we are sellling the property for Rs.1 crore.what will be capital gains tax how to benefit and calculate indexation and how to save capital gains tax. where can the money be invested .secondly whether the received money adjusted against furnishing and interior decoration of new house previous to sale.thirdly whether the money can be invested in land to save tax.fourthly whether land property sold attracts capital gains tax?

My grandfather aquired a property in Mumbai in 1940s. thereafter after my grandfathers and fathers?
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2 Replies to “My grandfather aquired a property in Mumbai in 1940s. thereafter after my grandfathers and fathers?”

  1. All the three beneficiaries has to pay capital gain tax for the sale proceed minus indexed rate. This rate is calculated based on the inflation. You can get the rate from Income Tax Office or from a practicing chartered accountant. If you want to avoid capital gain tax, deposit the amount for three years in REC ( Rural Electric Corporation) or in a new building construction. You may take two years time to decide the course of action, till then this amount is to be kept in a specially opened account for Capital Gain Tax.


  2. The property was acquired in 1940. However for the purpose of computing tax, Cost of Acquisition will be cost of the property or the Fair Market Value of that property on 01/04/1981, whichever is higher. So for identifying Fair Market Value in the year 1981 you may required the assistance of a valuer.

    Since you are claiming that the property belongs to you and your 3 brothers. The capital gain will be divided among the 4 of you. Say suppose Capital Gain comes out to be 20 lacs, then this gain will be divided among 4 of you i.e 5 lacs for each.

    Indexation for the year 1981-82 is 100.
    Indexation for the year 2011-12 is 785.
    Calculation of indexation is simple. Just multiply the value of the property in the year 1981 with 785 and divide the same by 100.

    There are various schemes provided by income tax act to save Cap Gain.

    You can claim exemption under Section 54EC by investing in notified bonds such as NHAI. However, there is a limit upto Rs. 50 lacs for such investment.

    Alternatively you also invest in a new residential house and claim exemption under Section 54F by
    1. purchasing within 1 year before or 2 years after the date of transfer (or)
    2. constructing within a period of 3 years after the date of transfer.

    You cannot claim exemption by adjusting money received against furnishing and interior decoration of new house.

    Investing in land will not help you to save tax. Remember exemption will be given in case residential house property only.





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