My client brought the land in 1965 and guideline value obtained in 2001. He sold the property in September 2024. Is it 115jc applicable or computation at special rate. If any suggestions or computation may welcome.

Ans: Plz. Approach a tax consultant/CA because the calculation in your case will be a detailed one and, in any case, you will need CA certificate to validate the tax liability arising out of this property sale transaction.

Ans: Understanding Property Valuation and Tax Implications
Dealing with property inherited from a parent can be complex, especially regarding its valuation and tax implications. I understand your concerns about the property bought by your father in 1959 and its current value for tax purposes. Let's break down the factors involved and clarify the best approach for you and your legal heirs.

Historical Purchase Price vs. Guideline Value
Your father's property was bought for Rs 500 in 1959. However, for tax purposes, especially capital gains tax, the purchase price might be adjusted based on guidelines from the Income Tax Department.

Guideline Value Adjustment:

The purchase price can be recalculated using the guideline value as of a certain base year, which simplifies tax calculations.
Base Year for Property Valuation
Understanding the Base Year Concept:

For properties acquired before 1st April 2001, the base year for calculating capital gains tax is 1st April 2001.

This means you can consider the fair market value of the property as of 1st April 2001 instead of the original purchase price in 1959.

Calculating Fair Market Value as of 1st April 2001
Local Consultant’s Advice:

The consultants suggested using the guideline value of the year 2000, which is correct for determining the property's fair market value as of the base year.
Steps to Calculate:

Determine the guideline value per square foot in 2001 for the property location.

Multiply this value by the property area (in square feet) to get the adjusted purchase price for tax purposes.

Example Calculation
Assume:

Guideline value in 2001: Rs 200 per square foot

Property area: 2 acres = 87,120 square feet

Calculation:

Adjusted purchase price = 87,120 sq ft * Rs 200/sq ft = Rs 1,74,24,000
This adjusted purchase price will be used to calculate capital gains when you sell the property.

Capital Gains Tax Calculation
Types of Capital Gains:

Long-Term Capital Gains (LTCG): Property held for more than 24 months.
Tax Implications:

For LTCG, you need to subtract the indexed cost of acquisition from the sale value.
Indexation Benefit
Indexation Adjusts Purchase Price:

Indexation accounts for inflation, allowing you to adjust the purchase price to current terms.
Example Indexation Calculation:

Indexed cost of acquisition = Adjusted purchase price * (Cost Inflation Index (CII) for the year of sale / CII for the year 2001)
Assume:

Sale year: 2024

CII for 2024: 348

CII for 2001: 100

Calculation:

Indexed cost = Rs 1,74,24,000 * (348/100) = Rs 6,05,43,520
Calculating Capital Gains
Sale Price:

Assume the property sells for Rs 800 per square foot.

Sale value = 87,120 sq ft * Rs 800/sq ft = Rs 6,96,96,000

Capital Gains:

Capital gains = Sale value - Indexed cost

= Rs 6,96,96,000 - Rs 6,05,43,520 = Rs 91,52,480

Tax Payable:

LTCG tax rate is 20%.

Tax = 20% of Rs 91,52,480 = Rs 18,30,496

Steps to Handle the Property
1. Regularization of Possession:

Work on legal regularization of the occupied part to avoid future disputes.
2. Divide Among Heirs:

Divide the property legally among the seven heirs for clarity and ease of sale.
3. Consult Professionals:

Engage a certified financial planner (CFP) for personalized advice.
Important Considerations
Legal Documentation:

Ensure all property documents are updated and legal heirs are recognized.
Market Conditions:

Analyze current market conditions to decide the best time to sell.
Investment of Sale Proceeds:

Plan for reinvestment of sale proceeds to minimize tax and maximize returns.
Professional Guidance
Certified Financial Planner (CFP):

A CFP can help navigate legal, tax, and investment complexities.
Tailored Advice:

Get advice tailored to your family’s financial goals and circumstances.
Conclusion
Using the guideline value of the year 2000 for tax purposes is correct and beneficial. Ensure proper legal documentation and seek professional advice for the best outcomes. This will help in managing the property sale efficiently and optimizing your financial benefits.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: As per budget proposal, there will not be any indexation benefit so gain will be sales minus actual cost. You have to pay tax @12.5%

Ans: Post 23 July 2024, there is no indexation available. So Capital Gain is simply Net sales price minus FMV as on 1 Apr 2001.
However, you will be able to get tax benefit of tax with indexation or tax without indexation whichever is lower can be opted