Yes, friends, how are you all? I am your friend Shreya
Gupta. Good morning, good afternoon, good evening.
Whoever is watching me right now, from their own cities, I
would like to extend a warm welcome to them.
Friends, how are you all? How are you all doing? Are you
having fun? Is life going well? Is the weather good in your
city?
Friends, if you remember, we were reading the chapter on
Capital Gain. We were reading the Head of Income on Capital
Gain.
We had started a discussion on that.
About the cost of acquisition, cost of improvement, what is
called transfer, when does capital gain occur, when does it
not occur.
We had discussed all these things.
Today, the discussion I want to discuss with you is beyond
this. Everything will be related to this.
Cost of acquisition, cost of improvement, these are two
ghosts that are attached to you.
Now, as long as this chapter is here, it is not going to
leave you behind.
Before I do the revision and move ahead, you all are very
confused in your life.
You all are very confused.
Sometimes I ask this friend, what do I have to do?
Sometimes I ask that friend, should I do business or a job?
Sometimes I ask this person, sometimes I ask that person.
Before asking, see if that person has the capacity to guide
you.
Does that person have the capability to tell you? You are
here, what are you doing with your life?
They say, who tells the way of the sea to any river?
Who tells the way of the sea to any river, who has a
passion for the destination, does not consult anyone?
And you are making the same mistake.
When a river comes out of any city, does it consult the
people around it?
Does it ask where the sea is? It makes its own way and
reaches the sea.
You have to make your own way in life.
In life, let me tell you, no one can help anyone.
This is your delusion. You have to set your own way, your
own target and achieve it yourself.
That is why, take advice from your parents.
Stop taking advice from the people around you.
And work for your target.
If you set a target, God will make the way for you.
You set the target.
Start focusing on your studies.
Teams will automatically make you understand.
Start focusing on your studies.
Teams will automatically make you understand.
I am not giving too much dose.
Then you will say, sir, you are getting too serious.
Come on, come on guys.
We were talking, friends.
We had discussed a format that how our capital gains come
out and how it does not come out.
First of all, what do we do?
First of all, we divide our assets into short term and long
term categories.
Is it a short term capital asset or a long term capital
asset?
What do we check for that?
Period of holding.
How long have you been holding that asset?
We check the period of holding for that.
In some cases, we had also seen that we have to check the
period of holding of the previous owner.
Keep checking your notes as well.
Come to the topic of period of holding.
Keep checking that as well.
Then we had discussed a format.
What do we do?
First of all, what do we do?
Short term.
Sale consideration.
You had the value of the sale.
You had minused the small expenses like brokerage,
commission, etc.
After that, you had net sales.
From net sales, you have your cost of acquisition.
That is, the rate at which you have bought that property.
The rate at which you have bought that capital asset.
That value.
What else did we minus?
Cost of improvement.
We also minus the cost of improvement.
Is there any problem in this?
No problem.
After that, what did we get?
After that, we got capital gains.
Look here.
We minused the cost of acquisition and cost of improvement.
What did we get?
Short term capital gain.
Or short term capital loss can also happen.
It is not necessary that there should always be profit.
Assume that you sold a property worth 1 crore.
And you bought it at an expensive price.
You bought it for 1 crore 10 lakhs.
There was a demand for some time that you needed money.
And you sold your house or property.
So, when you sell it,
you are selling it for 1 crore.
It is worth 1 crore 10 lakhs.
So, it is obvious.
Here, you will get a loss.
Short term capital loss.
Is there any problem here?
No problem.
Come to the second point.
Long term capital assets.
First of all, check the duration of the asset.
Is it more than 1 year?
Or more than 2 years?
Or more than 3 years?
If the shares are more than 1 year,
then it is long term.
If you hold land and buildings more than 2 years,
then it is long term.
If you have listed shares more than 2 years,
then it is long term.
If you have any other asset more than 3 years,
then it is long term.
You don't have to do anything.
It is the same procedure.
You will reduce small expenses from sales.
You will come to net sales.
But the difference in this case was
that you didn't have to take the cost of acquisition.
You had to take its indexed cost of acquisition.
What was this indexed cost?
Sir, what was this indexed cost?
Sir, I had told you about the indexed cost
2-3 lectures ago.
Like Rajesh Khanna had bought a bungalow
for Rs. 31 lakhs in 1973.
In Rs.
31 lakhs,
it cannot be bought at today's rate.
If I had gone to buy that property today,
then how much would I have got?
That value is the indexed cost of acquisition.
What else is to be lessened from that?
Indexed cost of improvement.
If I have spent money on repairing that property,
if I have got it painted,
if I have got one floor up,
then the cost of improvement,
the indexed cost of improvement,
should be lessened.
What will come out?
Long term capital gain.
It is also possible that long term capital loss will come.
You are considering the cost of improvement
to be a very small thing.
Our discussion is going on.
I feel that you are focusing more on
the cost of acquisition.
I feel that you are focusing less on
the cost of improvement.
Sir, don't take the cost of improvement lightly.
What is your objective?
Any assessor,
what is his objective here?
His objective is that
I should somehow reduce my profit.
This is his objective.
How will he reduce his profit?
How will he reduce his capital gain?
The more he shows his expenses in sales,
the more he shows his cost of acquisition,
the more he shows his cost of improvement,
the less his capital gain will be.
Do you understand?
So, in the cost of improvement,
suppose you get one floor up,
you have a plot,
and you have put one or two rooms on it,
and suppose the roof is still empty,
and tomorrow you get one more room built on the roof,
now the cost of building it
will be called the cost of improvement.
When you sell your entire plot tomorrow,
while selling it,
the roof that you built,
the separate room that you built,
the amount of money you spent on it,
multiply that value with your CII,
your Cost Inflation Index,
that if you had built it at today's rate,
how much would it have cost?
And minus that value.
There are many practical life examples
of this.
When the clients
sold the property,
they knew the purchase price,
so they put an indexation on the purchase price.
But they didn't know that
the small things that I am getting repaired,
that also has to be minused.
What happens because of that?
The capital gain tax increases.
So, do remember this.
Even in your house,
if someone sells a property tomorrow,
generally this goes on in every house.
Sometimes they buy, sometimes they sell.
So, do remember that
the cost of improvement,
have you minused it?
Cost of improvement means,
you didn't get it repaired,
you got it painted,
you got a floor built,
you got a garden built in a plot.
These are all costs of improvement.
You are increasing its features
by spending this.
This is the thing.
This is the point.
Come with me.
Are these things clear?
Come with me.
Section 49 was there.
Section 49 is not saying anything new.
It is saying the same thing
that I have told you a few lectures ago.
It is saying that
you can consider the cost to the previous owner
as the cost of acquisition.
I had told you that.
Like Bobby Deol got the property.
In that case,
what he is getting,
while getting it,
he didn't buy it.
As a gesture of gratitude,
he got the property.
When he sells his property in the future, he knows the sale
price, but what will be the purchase cost?
He has not purchased from his father-in-law.
The value at which the father-in-law purchased will be
taken.
And in that purchase, you will put your indexation.
What is indexation?
Purchase price multiplied by inflation index.
Cost inflation index over the year of transfer.
And divide it.
If you have purchased the property before 2001, then
purchase it in 2001.
If the property is after 2001, then purchase it in the year
of transfer.
This is the point.
Read it once.
In the following cases, cost of acquisition of the asset.
What are we talking about?
Will someone tell me what we are talking about?
We are talking about cost of acquisition.
What is the cost of acquisition?
Why is the cost of acquisition important?
Because when I sell a property, I should also know at what
level, at what rate I have purchased it.
If I show it more, the cost of acquisition, that is my
benefit.
More value will be minused from the sale.
Profit will be less, tax will also be less.
This is the cost of acquisition.
In the following cases, cost of acquisition shall be deemed
to be the cost for which the previous owner has purchased
the property.
To this cost, cost of improvement to the asset incurred by
the previous owner or SSE must be added.
For example, Bobby Deol had purchased a property worth 300
crores from his father-in-law.
Then whose cost of acquisition was it?
Father-in-law's.
Who purchased it?
Father-in-law.
And the cost of improvement.
Suppose, father-in-law had built a bungalow.
And on top of that bungalow, there was a terrace.
Later, he also added a couple of floors to the terrace.
The cost of improvement has come.
So, in that case, the cost of improvement that
father-in-law is doing, that has to be taken.
But suppose, Bobby Deol added a couple of floors to those
2-3 floors.
That has also become an improvement.
So, father-in-law's improvement and one's own improvement.
Both these values have to be minused.
Which one has to be minused?
The sales consideration.
The amount of money I am selling my property for.
The amount of money I am selling my capital asset for.
This has to be minused from that.
Any problem?
Is there any problem?
Sir, if you are teaching, then what is the problem?
Sir, this topic is considered a little tough.
But my attempt is to explain it to you in a very simple
language.
Come, next.
Let's discuss small points and move ahead in life.
This is not what we have to do in life.
Come, next.
Look at this.
Look at this point.
He is talking about a capital asset.
And he is saying that if there is a capital asset before
1st April 2001.
Meaning, if you are selling a capital asset today.
And when did you buy it?
If you are selling a property today.
Suppose, it was a property before 1st April 2001.
You bought that property before that.
So, in that case, what will be the cost of acquisition?
In that case, what will be the cost of acquisition?
Sir, why is the government doing this?
Why do we have to show the property before 2001 separately?
Why are we doing this?
This question should not have arisen.
When I have an indexation available.
So, whenever I buy that property.
I will simply multiply it by the indexation.
By the inflation index.
No, sir.
Try to understand this.
If you check that table.
Which is given in your book.
Where is it?
This table is given to you.
If you check that table.
In that table, you will find that the cost inflation index.
The cost inflation index which is given to you.
It is given since 2001.
You can see.
I think it is not showing here.
Now check this.
That you.
You.
From 1st, 4th, 2001.
Your cost inflation index starts from there.
The government says.
Tell me about 1980.
Tell me about 1990.
Tell me about 1995.
Tell me about 1997.
Tell me about 1947.
Tell me about whom and where.
So, the government simply said.
Brother, from 2001.
We start this cost inflation index.
And from 2001 onwards.
We will keep telling you about the years ahead.
Okay.
But where is the problem?
What is the problem?
If there is an asset before 2001.
I don't have that inflation index.
And when I don't have that inflation index.
Then I will not be able to index my cost.
You don't understand what I am saying.
No problem.
Don't worry.
I am ready to explain 4 times.
Understand this.
What I am saying is.
What we do is.
If I have a long term capital asset.
In long term capital asset.
What is the cost of acquisition?
The actual cost of acquisition.
Multiplied by CII.
The year I am transferring.
Divided by.
What is the year of CII? 1401.
Or. When I got it for the first time.
First held.
Whichever is later.
Okay.
This is what I am saying.
Suppose I bought an asset in 2006.
And I sold it in 2022.
Then what will I do here?
How will I multiply the cost of acquisition?
From 2022.
From 2022's CII.
Whatever it is.
200, 300, 350 whatever it is.
And how will I divide it?
Either from 1401's CII.
That is 100.
Or.
First held.
When was it first held? 2006.
Whichever is later.
Between 2001 and 2006.
Which one is later? 2006.
Of 2006.
How much will it be?
Remove it.
It will be 150 for example.
Till now we are reading this.
My question to you is.
Okay.
After 2001.
If I am selling a property.
Then it will be covered here.
That I have 2001's CII.
But suppose it is a property of 1980.
It is a property of 1970.
And I am selling it today.
There are many cases.
There are ancestral properties.
I am selling it today.
I need it.
I have to sell it today.
So in that case.
What is the cost to be taken?
How is it to be taken?
We are discussing this with you.
This whole discussion is happening.
And what is happening?
See.
Do you understand what we are discussing?
Come here.
Where the capital asset became the property of the SSE.
Before 2004-2001.
So what will be the cost of acquisition?
Cost of acquisition of the asset.
To the SSE.
Or its market value which was 2001.
At the option of the SSE.
What is he trying to say?
He is trying to say that.
If you have.
An asset before 2001.
Suppose.
My ancestors bought a land in 1980.
And at that time.
They bought that land for 1 lakh rupees.
The value of that land in 2001.
The market value of that land in 2004-2001 became 1 crore
rupees.
Now what should I take?
Cost of acquisition.
What am I taking?
He is saying that cost of acquisition means.
Cost of acquisition of the asset.
To the SSE.
How much was my actual cost of acquisition? 1 lakh rupees.
Or he is saying fair market value on 2004-2001.
What is the fair market value on 2004-2001? 1 crore rupees.
At the option of the SSE.
Now tell me one thing.
What is the benefit of taking the purchase cost?
Why do I take the purchase cost?
Why do I calculate the cost of acquisition?
I do it for this reason.
So that the property I am selling.
From that.
I minus the value of the purchase.
And after that.
What will come out is my profit.
Sir, who will get more benefit?
And how will it happen?
If I show more cost of acquisition.
Then my profit will be less.
Think about it.
If I sell the asset for 2 crores.
And I show the cost of 1 lakh rupees.
0.01 Then my capital gain is 1 crore 99 lakhs.
1 crore 99 lakhs.
Capital gain.
I will pay tax on this.
But here.
If I sell the asset for 2 crores.
And I show the cost of 1 crore.
Then my capital gain will be 1 crore.
Who will get more benefit?
To take more value.
Take more cost of acquisition.
You can't control the sales.
The value of the property you are selling.
I can see that.
How can you cheat?
You can do it in purchase price.
The purchase price of the government is saying, either take
the one lakh rupee one or take the market value of 2001.
I would like to minus whatever is more. The more I show the
purchase cost, the less my profit will be.
It's a simple game.
Have you ever made a profit and loss account?
If the sales is Rs.100 and the purchase is Rs.1, how much
is the profit? Rs.99.
But if the sales is Rs.100 and the purchase is Rs.80, how
much is the profit? Rs.20.
The less the profit, the less the tax. This is the benefit.
So in this case, the SAC would like to give the value of
Rs.1 crore.
Cost of acquisition of the asset or its fair market value
at the option of the SAC.
Why did we take only Rs.1 crore and Rs.2,001 crore?
Why did we take special treatment of Rs.1 crore and
Rs.2,001 crore?
Sir, the inflation index that the government has announced
is from 2001.
We don't have the indexation rates before that.
We are unable to know the rates.
Are the rates available after 2001?
That's why whatever adjustment has to be done, has to be
done in correspondence of 2001.
However, this is very important.
It is said that if the capital asset is land and building,
then the fair market value of 2001 will not exceed the
stamp duty value.
If the stamp duty value of this date was Rs.80 lakh, then
the maximum fair market value would be Rs.80 lakh.
What is the maximum cost of acquisition?
Maximum is Rs.80 lakh.
Why? Because this has become the stamp duty value.
What is the stamp duty value?
Sir, according to the government records, what is the value
of the house on the corner of that street in that city?
According to the government records, for the purpose of
registering, that is called the stamp duty value.
The government says that the value of this house is around
Rs.80 lakh.
You are saying that you sold it for Rs.1 crore.
You have made a cash transaction.
You have sold it in cash.
You want to use cash.
Your objective is to use your cash.
In that case, we will hold your acquisition cost up to the
maximum stamp duty value.
Beyond that, we will not give you the cost of acquisition.
Is the point clear?
Is it clear?
Shall we move ahead?
Sir, you have told us that the cost of acquisition, you can
either take the actual cost or you can compare it with the
fair market value of the house in 2001.
You have told us the hidden path.
You can take whatever is more.
It will be more beneficial.
But suppose, if I am getting it from the previous owner,
suppose I am getting it as a gift, will or inheritance,
then what should I do?
How should I do?
It is written here.
What does it say?
Where the capital asset became the property of the SSE by
any of the mode specified under 49.1.
What was written in 49.1?
Gift, will, distribution of the HUF.
The cost of acquisition to the SSE will be cost to the
previous owner.
The cost of acquisition will be taxable to Bobby Deol.
Even in such case, where the capital asset became the
property of the previous owner before 142001, if the
father-in-law bought the property before 142001, then SSE
can opt for the fair market value as on 142001.
If the father-in-law bought the property before 142001,
then Bobby Deol can opt for the cost of acquisition as on
142001.
But friends, in this case also, don't go beyond the stamp
duty value.
Maximum cost of acquisition will be up to the stamp duty
value.
What is written here?
However, in case of capital asset being land, building or
both, fair market value shall not exceed the stamp duty
value wherever available.
This is the point.
In case of land and building, if the actual was bought
before 2001, don't get confused.
Is it before 2001?
Yes, it is.
How much did I actually buy?
The market value of 2001, whichever is higher, buy that.
But keep in mind, that the value in the government records,
the stamp duty value, if it is more than that, then don't
buy that.
Maximum stamp duty value only, you will be able to buy
that, my dear.
Shall we proceed, sir?
Shall we proceed?
Come, let's discuss the cost of improvement.
It is a small topic, but it is important because, as I am
telling you, people don't pay attention to the cost of
improvement.
If you buy a house today, and after 2-3 years, if you make
a roof or a room, on the roof, and if you sell the house
tomorrow, then what is there in their mind?
That you bought the house in this much, and sold it in this
much.
Brother, take that cost also.
The amount of money you have spent on that room, minus that
also from your sale price.
Why are you showing more profit?
Are you mad?
Will you pay all the taxes to the government?
The cost of improvement, the roof you have made, the room
you have made, minus the value of that also.
Pay attention to these things.
When you sell the house tomorrow, remember, you have to buy
the purchase price.
And if it is long term, you have to buy it after indexing.
But along with that, you have to take the cost of
improvement also.
And on top of that also, you will get the benefit of
indexation, if the asset is long term.
Let's see what he says.
In case of goodwill, can there be cost of improvement?
Can there be?
In case of goodwill, can there be cost of improvement?
If I buy the brand name of a goodwill from a beginner, and
sell it later, then I get the cost of acquisition, and I
get the sale price.
But how can I improve this?
How can I improve the goodwill of a beginner?
The cost of making goodwill,
I don't know whether the goodwill will be ready in 5 years,
or in 10 years.
It is possible that I will keep working for years, and
there is no standing in my market.
This also happens.
In that case, the government said, if you have goodwill,
right to manufacture, right to carry on any business
profession, in that case, the cost of improvement will be
zero.
You don't have to take any cost of improvement of goodwill.
I know that many questions must be going on in your mind.
How can goodwill be improved by hard work?
I am not denying this.
But I have a limit.
I can't go beyond the law.
I can't do anything beyond what the law has written.
The law has assumed that the goodwill you have purchased or
made, you can't improve it.
If it is self-generated goodwill, the cost of acquisition
was zero.
If you purchased goodwill from someone, you would see the
actual cost.
Now, how and what will be the improvement?
The law doesn't want to discuss this.
It has written that the cost of improvement of goodwill
will be zero.
The law doesn't want to discuss this.
So, what should we do?
What should we believe?
We don't believe anything.
Any other capital asset?
Now, remove the point of goodwill.
Any other capital asset?
If you purchased a house, you had a roof built on it, you
had a room on the roof, the cost of improvement was zero.
You can minus that from your sales consideration.
But the problem was put by the government.
There was no problem.
There was a simple provision.
But I am saying, in our country, until you see the bonnet
of a good thing, how is the car running?
How is the car running properly?
It doesn't have to run properly.
Look at the bonnet of a running car.
Why is the car running properly?
This is the situation.
The same thing was done by the government.
When they were allowing a good cost of improvement,
why was there a need to put a date on it?
That after this date, you will get it. and if it is before
this date, then you won't get it.
Sir, what are you saying?
Brother, I am speaking the truth.
The government has said that if 1-4-2001
Sir, this 1-4-2001 is such a disgusting number.
This is such a disgusting number.
This is such a number.
Before this, something else.
After this, something else.
The cost inflation index also starts from here.
Sir, what kind of a number is this?
What kind of a date is this?
My brother, I can't do anything.
If you are born on 1-4-2001 or if your friend is born on
1-4-2001 then go and beat him up.
That son, you are the 1-4-2001.
Because of you, everyone is going down in the capital gain.
Whoever sees the 1-4-2001, the person who was born on it,
today he will be beaten up.
If you see a walking man, then ask him, son, were you born
on 1-4-2001?
Yes, come and beat him up.
Save him from this condition.
Don't leave him on 1-4-2001.
Anyway, the thing was going on that cost of improvement,
if after 1-4-2001, you got some improvement done, after
1-4-2001, you got some repair done, after 1-4-2001, you got
some painting done, after 1-4-2001, after 1-4-2001, you got
some construction done, you got some improvement done, then
only, you will get only that much expense.
You can consider that as your cost of improvement.
Even if you got it done by yourself, your own property, you
got it done by yourself, you will get it.
You get that property as a gift from someone.
You get it as a property.
Or you get it from Partition of HUF.
So, you can consider the previous owner's cost of
improvement.
Even if it is after 1-4-2001.
If it is after 1-4-2001, you will get it.
If it is before 1-4-2001, you won't get it.
Today, I am giving you an open challenge.
I am giving you an open blessing.
Wherever you get a person born in 1-4-2001, beat him up.
Don't leave that person who destroyed our life.
Come and beat him up.
He is saying that where the capital asset became the
property of the previous owner or SSE before 1-4-2001.
So, cost of improvement means all the expenses of capital
nature incurred in making any addition or alteration to the
capital asset on or after the set date by the previous
owner.
Is there any addition in your capital asset?
All the expenses related to the room that you had built,
the construction of the room, the labour that you will give
on a daily basis, the paint that you will get done, your
capital asset is improving because of that.
Its value is increasing.
So, you can take it on your own.
In any other case, cost of improvement means all the
expenses of capital nature incurred in making any addition
or alteration to the capital asset after it became his
property.
Its a simple thing.
However, there are such cases where capital asset might
become the property by mode specified in 1-4-2001.
How did SSE's property become?
By gift, will, partition of HUF.
So, in that case, cost of improvement means capital expense
in making any addition to the capital asset incurred by the
previous owner.
You made your capital asset altered.
If there was a balcony, you made it covered.
A room was made extra.
If there was a room, you made it open.
You altered the whole capital asset.
You will have to take those expenses in that.
You broke the tiles of the bathroom and made a better
bathroom.
You can include those expenses in that.
Is the point clear?
I will stop this lecture here.
Today, we discussed on what all things.
In the beginning, we did a revision.
We saw, in the case of short-term capital asset and
long-term capital asset, how to calculate it.
Short-term capital can also be loss and long-term capital
can also be loss.
We talked about cost of acquisition.
We saw that if there is any asset before this date, in that
case, what will be the cost of acquisition?
Actual cost or fair market value of 142001, whichever is
higher.
But remember, it will not go above stamp duty value.
Then we talked about cost of improvement.
We saw that if there is cost of improvement after 142001,
then you will get the cost of improvement.
You may have done it or your previous owner may have done
it.
But before 142001, you will not get any cost of improvement.
Logically, if you think about it.
Joking aside, if you think logically, 142001 is 20-22-23
years ago.
If you would have done any revision before 142001, wouldn't
it be worth it?
If you are talking about 142001, you would have done any
revision.
Now, what will be the condition of that revision?
You will have to revise it again.
In this case, because of this, you are allowed expenses
after 142001.
If you do improvement after 142001, then only you are
allowed.
Because it becomes a very old date.
The construction you have done or some alteration you have
done, whether it is there or not, nobody knows.
Sir, these were our topics for today.
We will meet in the next lecture.
Do revise it.
If you don't revise, topics will not be clear.
Sir, what happened to you?
Nothing has happened to me.
I am thinking about 142001.
You will go to revise it.
See you in the next lecture.
Goodbye.