Cost of improvement to property
I have been living in a house with my dependent wife for 7 yrs. This house was gifted to my wife by her mother. Now in February 2014 my dependent wife gifted this house to my name (we are living in the same house/no change of address). Now if I intend to sell this house it will be long term capital gain. I can get huge tax deduction on cost of improvement. But I don’t have any proof of the numerous improvements done by my father in law on this property. Now what should I do to get deductions from cost of improvement?
Asked in Property Law from Kolkata, West Bengal
1) you must be knowing contractor who did job in your house .
2) ask him to furnish duplicate bills as originals have been misplaced by you
3) further payment must have been made by cheque to contractor .
4) your account statement would reflect the debits made to your account .
5) contact a local CA in this regard for claiming deductions
1. How come there will be capital gain tax to be paid by you?
2. What capital you had invested on which you have made a gain or expecting to make a gain to pay capital gain tax?
3. How come your father in law's investment on his house which he had gifted to his daughter can be claimed by you as your investment?
4. You might have to pay gift tax and/or property tax for getting the said gift,
5. Consult a local CA for getting clear view in this regard.
1. The property was gifted to your wife by her father and then your wife further gifted it to you. You have held the property for less than a year.
2. If the capital gain is on sale of property asset which is in the possession of seller for less than three years duration then it is short term capital gain (STCG) else it falls in the purview of long term capital gain (LTCG). What capital gain have you made?
3. You can claim tax exemption under Section 54 on the long-term capital gain on the sale of a house. To avail of this exemption, you must use the entire profit to either buy another house within two years or construct one in three years. If you had already bought a second house within a year before selling the first one, you could still avail of the tax exemption.
1)Sir according to sec 49(1) cost of the previous owner treated as cost to the assessee .
Then why I be not getting LTCG benefit as I was given the property under gift.More over my entirely dependant wife gifted me & there was no change of address.Sir please throw some light
2)Sir the contractor who did job in our house is either dead or not within my reach, is there any agency which can assess what cost was incurred at that time?
Asked 2 years ago
1) you dont have any evidence to prove cost of improvements done by you .
2) where an asset is acquired by gift or inheritance, the period of long term capital asset shall be recokned from the date when the previous owner acquired such asset and the indexation shall be allowed accordingly from the year of acquisition by the previous owner. Further section 49(1) also provides that in such cases the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. -
1. Under such circumstances, one of my client collected quatitions of different earlier dates over a period of years, for renovation work on letter heads of a small time masion and also took his signature on it acknowledging receipt od money paid for such renovation,
2. His lawyer could satisfy the I.T.Department while showing those expenditures as spent on renovating the house sold on various earlier dates.