Capital gains on land development charge

POSTED BY Uma ON August 19, 2012 12:22 pm COMMENTS (7)

I wanted to know about the capital gains.
Suppose a land cost 1 Crore and i buy from a promoter, and i need 80 lakhs loan.
The bank says it will consider the value as 50 lakhs + 50 Lakhs, meaning for stamp paper buying we consider the land value as 50 lakhs(which is well above the guideline value), so stamp paper for this 50 lakhs alone, and the rest 50 lkhs will be treated as land development cost and will write a separate agrrement with the promoter.
so in this case i will save the stamp paper for the seond 50 lakhs part.
The bank says this option is only because i am buying from a promoter, who has spent cost on laying road on the layout etc.
While selling the land i want to know that can i show that i purchased it for 1 Crore or will it be considered that i paid only 50 Lakhs(as in stamp paper) and the capital gains will be more in this senario, if they consider that i paid 1 crore then obiously the capital gain tax will be less. which senario the tax authorites will consider is my question

7 replies on this article “Capital gains on land development charge”

  1. shashank kashettiwar says:

    Dear Uma,
    In both the situations whenever you want to sell the property the capital gain will be calculated on the amount of 1 cr only whether land and superstructure built on it is treated separately or in integral fashion. But here, you are getting the chance to save a huge amount of @ 3 L if you go with the ICICI option instead of LIC option.(Which I would say is a great opportunity!!!).

    You better spend some time and if required money to engage a CA and/or lawyer and then only go ahead once you understand all the implications of the decision.

    regards,
    Shashank

    1. Dear Shashank, this 3L Rs. ‘ll also be considered for purchase price at the time of selling & calculating LTCGs, hence the amount is not going in drain. Actually it ‘ll help to bring down the tax liability.

      Thanks

      Ashal

  2. Uma says:

    Hi Ashal,

    The bank says that for the second 50 lakhs, the builder will sign an agreement in 20 rupees stamp paper saying that he received 50 lakhs from me as land development cost. So i think i can show that i spent a total 1 Crore, is that correct?

    One more thing, this option i am getting only in Icici bnk and not in LIC(lic says to register for 1 crore). Thats why have asked a question regarding the banks well. Have you heard of this option before and any pro and cons you feel when we select the icici option in short as well as long term.

    1. Dear Uma, to avoid any problem in future, I w’d like to go with LIC way. ful 1C value registration.

      Thanks

      Ashal

  3. Uma says:

    Explaning it again

    I wanted to know about the capital gains.
    Suppose a land cost 1 Crore and i buy from a promoter, and i need 80 lakhs loan.
    The bank says it will consider the value as 50 lakhs + 50 Lakhs, meaning for stamp paper buying we consider the land value as 50 lakhs(which is well above the guideline value), so stamp paper for this 50 lakhs alone, and the rest 50 lkhs will be treated as land development cost and will write a separate agrrement with the promoter.
    so in this case i will save the stamp paper for the seond 50 lakhs part.

    The bank says this option is only because i am buying from a promoter, who has spent cost on laying road on the layout etc.

    While selling the land i want to know that can i show that i purchased it for 1 Crore or will it be considered that i paid only 50 Lakhs(as in stamp paper) and the capital gains will be more in this senario, if they consider that i paid 1 crore then obiously the capital gain tax will be less. which senario the tax authorites will consider is my question

    1. dear Uma, If you can prove the actual expense of 1C Rs. to purchase the property in question, you may calculate your capital gains accordingly. Else you w’d have to calculate from 50L Rs. base purchase price.

      Thanks

      Ashal

  4. Dear Uman, can you explain your situation or this query?

    thanks

    Ashal

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