Accountancy, asked by thasirfa346, 4 months ago

(a) Mr. Kannan is the owner of a house property which he purchased in June 2006 for Rs. 90,000. He sold it for Rs. 60,10,000 on 15th May 2019 and incurred an expenditure of Rs. 10,000 for brokerage. He bought a residential house on 15th January 2019 for a sum of Rs. 2,50,000 and sold this house on 15th March 2020 for a sum of Rs. 3,00,000 and paid a sum of Rs. 3,000 as commission. Compute the capital gains chargeable to tax. CII : 2006-07 : 122; 2019-20 : 289.

Answers

Answered by Afreenakbar

Answer:

The capital gains chargeable to tax is Rs. 57,70,744.26.

Explanation:

We must determine the indexed cost of acquisition, indexed cost of improvement, and capital gains in order to determine the capital gains subject to tax.

Calculate the indexed cost of acquisition in step 1:

Purchase price = Rs. 90,000.

Cost Inflation Index (CII) for the purchase year (2006-07) was 122, while CII for the sale year (2019-20) was 289

$Indexed \: cost \: of \: acquisition = Cost \: of \: acquisition \times \frac{(CII \: for \: the \: year \: of \: sale }{ CII \: for \: the \: year \: of \: acquisition)}$

= Rs. 90,000 ( $\frac{289 }{ 122 }$ )

= Rs. 2,12,950

Calculate the indexed cost of improvement in step 2:

Improvement expense is Rs. 10,000.

$Indexed \: cost \: of \: improvement = Cost \: of \: improvement \times \frac{ (CII \: for \: the \: year \: of \: sale }{ CII \: for \: the \: year \: of \: improvement)}$

= Rs. 10,000 × ( $\frac{289 }{ 122 }$ )

= Rs. 23,305.74 (approx.)

Calculate the capital gains in Step 3:

Sale price = Rs. 60,10,000

Less: Brokerage = Rs. 10,000

Less: Indexed cost of acquisition = Rs. 2,12,950

Less: Indexed cost of improvement = Rs. 23,305.74

Less: Commission = Rs. 3,000

Capital gains = Sale price - (Indexed cost of acquisition + Indexed cost of improvement + Commission)

= Rs. 60,10,000 - (Rs. 2,12,950 + Rs. 23,305.74 + Rs. 3,000)

= Rs. 57,70,744.26 (approx.)

Therefore, the capital gains chargeable to tax is Rs. 57,70,744.26.