“A” enters into agreement of sale for purchases of property belonging to “B”. A gives part payment as advance in two instalments. Later “A“ assigns the agreement in favor of “C” and in the process recovers advance given plus premium from “C”.
There are decisions to say that premium has to be taxed as capital gain because right to acquire property is also immoveable property. In the above circumstance, how is the cost arrived at and whether indexing is allowed for each of advance given at different dates.
Understanding Capital Gains Tax: Installment Payments as Acquisition Cost & Indexation Rules for Long-Term Gains Explained In a discussion about capital gains tax, an individual queried about the tax implications when 'A' enters a property purchase agreement with 'B,' pays in installments, and later assigns the agreement to 'C,' recovering the advance plus a premium. The response clarified that the installments paid by 'A' are considered the cost of acquisition, and indexation is allowed for each installment based on the year of payment. However, indexation applies only if the transaction qualifies as a long-term capital gain, meaning the property is sold after two years from allotment. (AI Summary)
TaxTMI 
TaxTMI 
