Capital Gain

[Ethirajan Parthasarathy]

For purpose of Capital Gain on sale of Capital assets purchased before April’2001, section 55 provides for treating fair market value as on 01/04/2001 as “deemed cost” for purpose of indexing.

There is an explanation in said section clarifying what is fair market value. In the said explanation, there is a proviso which reads

“provided that in case of capital asset referred to in sub-clauses (i) and (ii), being land or building or both, the fair market value of such asset on the 1^st day of April 2001 for the purposes of the said sub-clauses shall not exceed the stamp duty value, wherever applicable, of such asset as on the 1^st day of April’2001”

There is notification dt:03/12/1998 providing estimated market value of immovable properties for purpose of registration. This has not been rescinded as on 01/04/2001 which means for purpose of registration even as on 01/04/2001, the values mentioned vide notification dt:03/12/1998 holds good & sub-registrar can not demand higher stamp duty even though market value as on 2001 has gone up compared to 1998.

In the light of the above read with the proviso, I feel we are bound to follow the values specified in notification dt:03/12/1998 to calculate capital gain. But there appears to be another view that we can still go for valuation as of 2001by the Approved Valuer because the property value changes depending upon location, size etc.,

Can anybody confirm about getting valuation from Approved Valuer in spite of what is stated in Sec.55

[Nikita Rai]

Capital gain is the profit or gain arising from the sale of a capital asset, such as property or stocks. Capital gains are taxed under the Income Tax Act, and the tax rate varies based on the holding period of the asset and the taxpayer's income slab.

AI Summary

Fair market value cap on property limits indexed cost to stamp duty value, creating valuation conflict with approved valuers. For indexation of pre-April 2001 capital assets the deemed cost is fair market value as of 1 April 2001, but for land and buildings that fair market value shall not exceed the stamp duty value; a 1998 notification fixed estimated market values for registration and remained in force as of that date, raising whether an Approved Valuer may nonetheless determine a higher 2001 valuation for capital gains computation.