Veena has a house property acquired on 15th Nov, 1999 for ₹4,80,000. She incurred improvement expenditure on such property ₹80,000 on 19th Sep., 2000 and ₹50,000 on 18th July, 2012. Market value of such property as on 1s

Computation of Capital Gain of Mrs. Veena for the AY 2021-22 Particulars Amount (₹) Sale Consideration (W.N. 1) 21,50,000 Less: Expenses on transfer (10,000) Net Sale Consideration 21,40,000 Less: Indexed cost of acquisition (W.N. 2) (18,78,500) Less: Indexed cost of improvement (W.N. 3) (72,250) Long Term Capital Gain 1,89,250 Working Notes: The compensation (i.e. ₹21,50,000) decided by the Government shall be treated as sale consideration. The income arising from compulsorily acquisition of property shall be taxable in the year in which first instalment has been actually received. Hence full value of sale consideration i.e. ₹21,50,000 is taken for computing capital gains for AY 2021-22. Cost of acquisition is the original cost of acquisition (i.e. ₹4,80,000) or Fair market value as on 1st April, 2001 (i.e. ₹6,50,000) whichever is higher. Indexed Cost of Acquisition = Fair Market Value as on 01.04.2001 x (CII of PY 2019-20 / CII of FY 2001-02) = ₹6,50,000 x (289 / 100) = ₹18,78,500 Cost of improvement incurred before 1st April, 2001 is to be completely ignored for computing capital gains. Improvement expenditure on 19th Sep, 2000 (₹80,000) is ignored. Improvement expenditure on 18th July, 2012 (₹50,000) is considered. Indexed Cost of Improvement = ₹50,000 x (CII of PY 2019-20 / CII of FY 2012-13) = ₹50,000 x (289 / 200) = ₹72,250 Though the property was compulsorily acquired by the Government in the PY 2019-20 but the compensation were received in the PY 2020-21, and PY 2021-22, therefore the entire amount shall be taxable in the PY 2020-21, as first instalment is received in PY 2020-21. However indexation benefit shall be available till the year of compulsorily acquired (i.e. previous year 2019-20).