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How to Calculate Indexed Cost of Acquisition & Improvement

This provision deals with section 48, defines as the amt which bears cost of acquisition, the same ratio as cost inflation index for the year in which asset is transferred bears cost inflation index for first year in which asset was held or beginning on April, 1981 whichever is higher.

 

Situation: 1

Capital asset acquired by assess in before april1, 1981 referred in sec 49(1)

Fair market value april1, 1981or cost of acquisition Of asset whichever is more

 

 

× cost inflation index for year in which it occur

cost inflation index for 1981-82

 

 

Cost of improvement (ignore prior to April 1, 1981)

 

 

× cost inflation index for year in which it occur

cost inflation index in the year in which improvement took place

 

 

Situation: 2

Capital asset acquired by assess after april1, 1981 referred in sec 49(1)

Cost of acquisition

 

 

× cost inflation index for the first year in which it occur

cost inflation index for year in which asset is acquired

 

 

Cost of improvement incurred by Assess

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index for year in which improvement took place

 

 

Situation: 3

Capital asset is acquired by assess before April 1, 1981 and the same is originally acquired by previous owner prior to April 1, 1981

Fair market value april1, 1981or cost of acquisition Of previous owner whichever is more

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index for 1981-82

 

 

Cost of improvement incurred by assee & previous owner

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index in year in which it took place

 

 

Situation: 4

Capital asset is acquired by assess after April 1, 1981 but it was acquired by previous owner before April 1, 1981.

Fair market value april1, 1981or cost of acquisition Of previous owner whichever is more

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index in year in which it took place

 

 

Cost of improvement incurred by assee & previous owner

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index in year in which it took place

 

 

Situation: 5    

This situation covers where capital asset is acquired by assee after April 1, 1981 & it was it was acquired by previous owner April 1, 1981

 

Cost of acquisition to the previous owner

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index for year in which asset was held by assess

 

 

Cost of improvement incurred by assee & previous owner

 

 

× cost inflation index for the year in which asset is transferred

cost inflation index in year in which improvement took place

 

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2 thoughts on “How to Calculate Indexed Cost of Acquisition & Improvement
  • Sameer says:

    Hello,

    My query is about saving the capital gain tax.

    My father Purchased residential apartment in Aug 2003 for 7,00,000
    Sold Apartment in March 2011 for 29,00,000
    Entire amount was deposited in Capital Gains Saving Account in July 2011.

    The said property is in Goa, and he desires to purchase new property in Bangalore.

    Considering CII, I have calculated
    Long term capital gain = 17,13,174
    Capital Gains Tax = 3,42,635

    Is this correct?

    Can this tax be saved if he
    1) Invest in an under construction apartment to be completed only by 2015?
    2) In a villa, where Land registration will be done by Feb 2014 costing 30,00,000
    Construction of villa will be completed by Aug 2014?
    3) Buying only a plot of land worth 20,00,000
    4) Buys a ready to move in apartment?

    Or is there any other way to save the tax, say, by now investing into relevant bonds?
    Can we subtract broker fees, renovation costs (amounting to 60,000) from this taxable amount?
    Also, he is a senior citizen, does that benefit anyways?
    Does it matter whether he has any other income or not?

    If he does not find any suitable property, can he choose to pay 10% tax now instead of using the indexation?
    How can he withdraw the money from Capital Gain Account?

    Thanks

    Sameer