IT Department clarifies acquisition cost of real estate bought before 2001 for LTCG calculations

The cost of acquisition of real estate properties purchased before 2001 will be the fair market value (FMV, not exceeding the stamp duty value) as of April 1, 2001, or the actual cost of the land or building for the purpose of calculation of long-term capital gains (LTCG) tax, the I-T department has said. The indexation benefit allowed taxpayers to compute gains arising out of sale of capital assets after adjusting inflation. For properties purchased before 2001, fair market valuation (not exceeding the stamp duty value) can be used as a base to determine the indexed price. The indexed price will then be reduced from the sale price for calculating LTCG that will be taxed at 20 per cent. In a post on X, the I-T department said an issue has been raised as to what would be the cost of acquisition as on April 1, 2001, for properties purchased prior to 2001. For properties (land or building or both) purchased prior to April 1, 2001, the cost of acquisition as on 1.4.2001 shall be the cost of acquisition of the asset to the assessee; or the fair market value (not exceeding the stamp duty value, wherever available) of such asset as on April 1, 2001.The LTCG in such cases is Rs 63.7 lakh (Rs 1 crore minus Rs 36.3 lakh). At a tax rate of 20 per cent, the LTCG tax for such properties would be Rs 12.74 lakh.
 

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