Q.837 Old property purchased

1967. How to determine capital

gain?

Question: Greetings, Mr. Chand at the outset kudos for your help to nri community. perfect work. i have an old property dating back to the year 1967, i dont have any purchase papers of the property, now the property is sold and i have to calculate the capital gain tax, for which i need the value of purchase of the property. i believe the value as determined in the year 1981 would apply, but can you kindly tell me as to how could this value be arrived at? regards. [January 15, 2016] Answer: As cost inflation index numbers that are available start from the financial year 1981 - 1982, many people who have purchased or perhaps inherited property that was purchased before 1981, often are left with the question on how to find the indexed cost of acquisition of a house that was purchased several years before index numbers became available. The property you mention was purchased in 1967. For properties purchased prior to availability of cost inflation numbers [purchased before 1981] you need to first arrive at what is commonly known as ‘Fair Market Value’ (FMV) of the property as on April 1st, 1981. To clarify: • What would the property purchased in 1967 be worth on April 1, 1981. Once the Fair Market Value is ascertained. Then indexed cost of acquisition is calculated using the indexing number 100 and the fair market value price. On how to calculate fair market value of a property purchased a long time back, I have an article on this website with a sample calculation to help readers easily understand the calculation of long term capital gain on the sale of properties purchased prior to availability of cost inflation index numbers. To view the article use the link: http://nriinformation.com/articles5/capital_gain _india.htm For an updated Cost inflation chart up to 2016 Click HERE