Capital Gain, Income Tax

[Ethirajan Parthasarathy]

“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.

Posts / Replies

[Padmanathan Kollengode]

Installments paid will be treated as cost. indexation will be allowed for each installments based on year in which such installment is paid. However, the question of indexation arises only if it is a LTCG ie. sold after 2 years from allotment.