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Rules for determining the value of assets - Income Tax
Taxability of Sale of Land or Building – Section 50C
Capital Gains Tax Valuations For Your Residential Property
capital gain tax on sale of immovable property
Income Tax: LTCG tax on the sale of property based on higher
Valuation of immovable property.
3. Subject to the provisions of rules 4, 5, 6, 7 and 8, for the purposes of sub-section (1) of section 7, the value of any immovable property, being a building or land appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12.5 :
Provided that in relation to any such property which is constructed on leasehold land, this rule shall have effect as if for the figure 12.5,—
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(a)
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where the unexpired period of the lease of such land is fifty years or more, the figure 10.0 had been substituted ; and
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(b)
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where the unexpired period of the lease of such land is less than fifty years, the figure 8.0 had been substituted :
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Provided further that where such property is acquired or construction of which is completed after the 31st day of March, 1974, if the value so arrived at is lower than the cost of acquisition or the cost of construction, as increased, in either case, by the cost of any improvement to the property, the cost of acquisition or, as the case may be, the cost of construction, as so increased, shall be taken to be the value of the property under this rule :
Provided also that the provisions of the second proviso shall not apply for determining the value of one house belonging to the assessee,where such house is acquired or the construction whereof is completed after the 31st day of March, 1974, and the house is exclusively used by the assessee for his own residential purposes throughout the period of twelve months immediately preceding the valuation date and the cost of acquisition or, as the case may be, the cost of construction, as increased, in either case, by the cost of any improvement to the house, does not exceed,—
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(a)
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if the house is situate at Bombay, Calcutta, Delhi or Madras, fifty lakh rupees ;
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(b)
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if the house is situate at any other place, twenty-five lakh rupees :
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Provided also that where more than one house belonging to the assessee is exclusively used by him for residential purposes, the provisions of the third proviso shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf.
Net maintainable rent how to be computed.
4. For the purposes of rule 3, "net maintainable rent" in relation to an immovable property referred to in that rule, shall be the amount of gross maintainable rent as reduced by—
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(i)
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the amount of taxes levied by any local authority in respect of the property ; and
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(ii)
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a sum equal to fifteen per cent of the gross maintainable rent.
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Gross maintainable rent how to be computed.
5. For the purposes of rule 4, "gross maintainable rent", in relation to any immovable property referred to in rule 3, means—
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(i)
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where the property is let, the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority in whose area the property is situated for the purposes of levy of property tax or any other tax on the basis of such assessment, whichever is higher;
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(ii)
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where the property is not let, the amount of annual rent assessed by the local authority in whose area the property is situated for the purpose of levy of property tax or any other tax on the basis of such assessment, or, if there is no such assessment or the property is situated outside the area of any local authority the amount which the owner can reasonably be expected to receive as annual rent had such property been let.
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Explanation.—In this rule,—
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(1)
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"annual rent" means,—
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(a)
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where the property is let throughout the year ending on the valuation date (hereinafter referred to as "previous year"), the actual rent received or receivable by the owner in respect of such year;
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(b)
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where the property is let for only a part of the previous year, the amount which bears the same proportion to the amount of actual rent received or receivable by the owner for the period for which the property is let as the period of twelve months bears to the number of months (including part of a month) during which the property is let during the previous year :
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Provided that in the following cases, such actual rent under sub-clauses (a) and (b) shall be increased in the manner specified below :—
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(i)
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where the property is in the occupation of a tenant and taxes levied by any local authority in respect of the property are borne wholly or partly by the tenant, by the amount of the taxes so borne by the tenant ;
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(ii)
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where the property is in the occupation of a tenant and expenditure on repairs in respect of the property is borne by the tenant, by one-ninth of the actual rent ;
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(iii)
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where the owner has accepted any amount as deposit (not being advance payment towards rent for a period of three months or less), by the amount calculated at the rate of 15 per cent per annum on the amount of deposit outstanding from month to month, for the number of months (excluding part of a month) during which such deposit was held by the owner in the previous year, and if the owner is liable to pay interest on such deposit, the increase to be made under this clause shall be limited to the sum by which the amount calculated as aforesaid exceeds the interest actually paid;
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(iv)
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where the owner has received any amount by way of premium or otherwise as consideration for leasing of the property or any modification of the terms of the lease, by the amount obtained by dividing the premium or other amount by the number of years of the period of the lease;
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(v)
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where the owner derives any benefit or perquisite, whether convertible into money or not, as consideration for leasing of the property or any modification of the terms of the lease by the value of such benefit or perquisite;
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(2)
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"rent received or receivable" shall include all payments for the use of the property, by whatever name called, the value of all benefits or perquisites whether convertible into money or not, obtained from a tenant or occupier of the property and any sum paid by a tenant or occupier of the property in respect of any obligation which, but for such payment, would have been payable by the owner.
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Adjustments to value arrived at under rule 3, for unbuilt area of plot of land.
6. Where the unbuilt area of the plot of land on which the property referred to in rule 3 is constructed exceeds the specified area, the value arrived at in accordance with the provisions of rule 3 shall be increased by an amount calculated in the following manner, namely :—
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(a)
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where the difference between the unbuilt area and the specified area exceeds five per cent but does not exceed ten per cent of the aggre-gate area, by an amount equal to twenty per cent of such value;
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(b)
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where the difference between the unbuilt area and the specified area exceeds ten per cent but does not exceed fifteen per cent of the aggre-gate area, by an amount equal to thirty per cent of such value;
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(c)
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where the difference between the unbuilt area and the specified area exceeds fifteen per cent but does not exceed twenty per cent of the aggregate area, by an amount equal to forty per cent of such value.
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Explanation.—For the purposes of this rule and rule 6,—
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(a)
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"aggregate area", in relation to the plot of land on which the property is constructed, means the aggregate of the area on which the property is constructed and the unbuilt area;
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(b)
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"specified area", in relation to the plot of land on which the property is constructed, means—
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(i)
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where the property is situate at Bombay, Calcutta, Delhi or Madras, sixty per cent of the aggregate area ;
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(ii)
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where the property is situate at Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Cochin, Hyderabad, Indore, Jabalpur, Jamshedpur, Kanpur, Lucknow, Ludhiana, Madurai, Nagpur, Patna, Pune, Salem, Sholapur, Srinagar, Surat, Tiruchirapalli, Trivandrum, Vadodara (Baroda) or Varanasi (Benaras), sixty-five per cent of the aggregate area; and
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(iii)
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where the property is situate at any other place, seventy per cent of the aggregate area :
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Provided that where, under any law for the time being in force, the minimum area of the plot of land required to be kept as open space for the enjoyment of the property exceeds the specified area, such minimum area shall be deemed to be the specified area;
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(c)
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"unbuilt area", in relation to the aggregate area of the plot of land on which the property is constructed, means that part of such aggregate area on which no building has been erected.
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Adjustment for unearned increase in the value of the land.
7. Where the property is constructed on land obtained on lease from the Government, a local authority or any authority referred to in clause (20A) of section 10 of the Income-tax Act, and the Government or any such authority is, under the terms of the lease, entitled to claim and recover a specified part of the unearned increase in the value of the land at the time of the transfer of the property, the value of such property as determined under rule 3 shall be reduced by the amount so liable to be claimed and recovered or by an amount equal to fifty per cent of the value of the property as so determined, whichever is less, as if the property had been transferred on the valuation date.
Explanation.—For the purpose of this rule, "unearned increase" means the difference between the value of such land on the valuation date as determined by the Government or such authority for the purpose of calculating such increase and the amount of the premium paid or payable to the Government or such authority for the lease of the land.
Rule 3 not to apply in certain cases.
8. Nothing contained in rule 3 shall apply,—
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(a)
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where, having regard to the facts and circumstances of the case, the Assessing Officer, with the previous approval of the Deputy Commissioner, is of opinion that it is not practicable to apply the provisions of the said rule to such a case; or
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(b)
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where the difference between the unbuilt area and the specified area exceeds twenty per cent of the aggregate area; or
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(c)
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where the property is constructed on leasehold land and the lease expires within a period not exceeding fifteen years from the relevant valuation date and the deed of lease does not give an option to the lessee for the renewal of the lease,
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and in any case referred to in clause (a) or clause (b) or clause (c), the value of the property shall be determined in the manner laid down in rule 20.
