CALCULATION OF LONG TERM CAPITAL GAIN ON SALE OF LAND AND BUILDING

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Ques- Assessee purchased  land in Previous year 1993-94 for Rs 95000 and than house was constructed upon it for Rs 7 laks, construction was completed in year PY1996-1997, In PY 2015-16, house was sold for Rs 1.15 crore, How to calculate Capital Gain on Land and building seperately? 


 


Question asked by Aman Arora, memeber of MKF on whatsapp group


 


Capital Gain- Gain arises when we sell anything, profit or loss will not be there when we purchase anything ,on sale only it will come in question and when we sell capital asset than there is capital gain, Here we will discuss when capital gain arises on assets other than shares, securities and bonds.


Capital gain are of two types- 


Long Term Capital Gain- When asset is held for more than 36 months and while calculating capital gain benefit of indexation is given, Tax rate is 20% calculated on capital gain


 


Short Term Capital gain- When asset is held for less than 36 months, tax on capital gain is to be calculated as per slab rate.


In the given case land was purchased in PY 1993-94, sale was in PY 2015-16, so 36 months has been completed, Long term capital will be calculated


Building was constructed in 1996-1997 and PY of Sale is 2015-16, 36 months has been completed so here also long term capital is to be calculated for building.


As for both land and building long term capital gain is to be calculated so no need of calculating seperate capital gain for land and building and no need of bifurcation of selling price of the same.


Capital Gain will be calculated as follows:


Selling price                                                                                                                                  1,15,00.000


Less: Indexed cost of land-95000*1081/244                                                                                     4,20,881


Less: Indexed cost of House-7lakh*1081/305                                                                                 24,80,984


Long term Capital Gain                                                                                                                    -------------


                                                                                                                                                         85,98,135


Suppose in this case house was constructed in Previous Year 2014-15, and property was sold in PY 2015-16, so for house property 3 years has not been completed, so for house short term capital gain is to b calculated and for Land long term capital gain is to be calculated and bifurcation is required of selling price so that capital gain can be calculated seperately for land and building.