Selling My Inherited Family Plots: How Will I Be Taxed?

Ans: Your long term capital gains (LTCG) would need to be calculated based on your indexed cost of acquisition of plot, construction and any improvements or alterations done by you of a permanent nature. For doing this, your original costs, inflated by the CII (Cost Inflation Index) as given out by the Govt from time to time is to be used.

The current CII is available from 2001 onwards, while your purchases relate to much earlier. There are ways of handling this including a valuation to be done by a competent professional.

I would recommend you to approach a Govt certified valuer or a CA to evaluate the LTCG in this case.

Ans: For taxation on redevelopment, there was amendment from 1.4.2018. Before said amendment, when property is transferred to builder for development, capital gain chargeable to tax. I understand that you have not paid any tax in the year in which property is transferred to builder, accordingly, it is advised to take proper consultancy from tax consultant.

Ans: To calculate the capital gains tax on the sale of your property, we need to consider the acquisition cost, the cost of improvement, and the sale proceeds. Let's break down the calculations:

Acquisition Cost:
The acquisition cost is the amount you paid for the land in 2001, which is Rs. 2.5 lakhs.

Cost of Improvement:
The cost of improvement includes the expenses incurred for construction and any subsequent additions or extensions made to the property. In this case, it includes the construction of the initial two floors, the extension of one floor, and any other related expenses. You mentioned that the total expenses were around 25-30 lakhs. Let's assume the cost of improvement is Rs. 28 lakhs.

Indexed Cost of Acquisition and Improvement:
To adjust the acquisition cost and cost of improvement for inflation, we need to calculate the indexed cost. The indexed cost is calculated using the Cost Inflation Index (CII) provided by the Income Tax Department. The CII for the relevant years can be found on the Income Tax Department's website.

Let's assume the CII for the year 2001-2002 was 100 and for the current financial year, it is 317.

Indexed Cost of Acquisition = Acquisition Cost × (CII for the year of sale/CII for the year of acquisition)
Indexed Cost of Acquisition = Rs. 2.5 lakhs × (317/100) = Rs. 7,92,500

Indexed Cost of Improvement = Cost of Improvement × (CII for the year of sale/CII for the year of improvement)
Indexed Cost of Improvement = Rs. 28 lakhs × (317/100) = Rs. 88,76,000

Capital Gain:
To calculate the capital gain, deduct the indexed cost of acquisition and the indexed cost of improvement from the sale proceeds.
Capital Gain = Sale Proceeds - (Indexed Cost of Acquisition + Indexed Cost of Improvement)
Capital Gain = Rs. 70 lakhs - (Rs. 7,92,500 + Rs. 88,76,000)
Capital Gain = Rs. -26,68,500 (Assuming the indexed cost is higher than the sale proceeds)

Since the calculated capital gain is negative, it means there is no capital gain tax applicable in this case. This is because the sale proceeds are less than the indexed cost of acquisition and improvement.

Ans: Capital gain amount is derived by deducting indexed cost from sale consideration.

Assuming residential property is acquired in FY 2012-13 in 40 lacs, indexed cost will be Rs.69,60,000 and accordingly there will capital loss.

You can calculate the indexed cost from the income tax calculator https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx