Biz loss can be carried forward
QI am an owner of a house in Greater Kailash-1, New Delhi. The house is built on a free hold plot of 286 square yards. This was purchased in 1964 for approximately `15,000. The ground floor and a room on the first floor were built in 1965 for `48,000. Later, some more rooms were added in 1970 at a cost of `70,000. Please let me know the current value of the property based on current indexation.
A) In respect of capital assets acquired before April 1, 2001, the Income-Tax Act provides an option to the assessee to adopt either the original cost or Fair Market Value (FMV) as on April 1,
2001, as the cost of acquisition for the purpose of computation of capital gains. The assessee has to apply to the sub-registrar to determine the FMV of the property. Generally the value of land is given in terms of rate per square yard and the value of the cost of construction in terms of rate per square feet.
The benefit of indexation can be availed by applying the cost inflation index on the FMV adopted as the cost of acquisition. This benefit can be availed either from the year of acquisition of the asset or from the base year 2001-02, in your case being 2001-02 [Cost inflation index for FY
2001-02 is 100 and for FY 2019-20 is 289]. Indexed Cost of Acquisition = (Cost of acquisition or FMV as on 01.04.2001 as the case may be) divided by (Index Factor for base year 2001-02) multiplied by Index factor for the year of transfer.
The Long Term Capital Gain is calculated as sale consideration less indexed cost of acquisition and taxed at the rate of 20.8 per cent.
QS. GOPAL Via email
I filed my original return within the time allowed under Section 139(1) of the Income-Tax Act. In this return, I claimed that a business loss of `4.5 lakh be carried forward to the subsequent years. I wish to revise this return under Section
139(5) due to an error in computation in the original return. This will result in an increase the business loss to be carried forward to `5 lakhs. Kindly clarify whether I will be eligible to carry forward the loss of
`5 lakhs if I revise the return.
NILESH Via email
A) If a loss is incurred, being a business loss the same can be carried forward only if the return is filed within the due date stipulated under Section 139(1). A loss return furnished is deemed to have filed under Section 139(1).
Therefore, a loss return can also be revised under section 139(5). If the return referred to in the query is for the FY 2018-19, it needs to be revised upto March 31, 2020. The enhanced loss assessed by you through the revised return can be carried forward and set off against the business income within a period of eight assessing years immediately succeeding the assessment year in which the loss is first computed.
The Income Tax Act does not deny the benefit of carry forward of loss to the extent of `5 lakh merely because such enhanced claim has been made through furnishing a revised return.