FMV, circle rates and capital gains: A guide for property sellers

The list of valuers registered with the Income Tax Department for valuation of immovable property is generally uploaded by the chief commissioner of income tax in charge of the particular region and can be found on the income tax website. 

However, it is not mandatory to obtain the value as on 1 April 2001 from any particular authorised person and can even be computed by the taxpayer. 

In most cases, one considers the stamp duty value as on 1 April 2001 as the cost of acquisition of an immovable property acquired prior to such date if the actual cost of acquisition is lower. 

The fair market value of the property as on 1 April 2001 for computing the cost of acquisition cannot exceed the stamp duty value of such property. The stamp duty value can be computed at the circle rate generally available on the website of the ministry of stamp and registration of the respective state government. 

You would need to select the specific area to get the rate. However, it is advisable to obtain a valuation report from the registered valuer so that one can submit the same before the tax authorities, if required to substantiate the cost of acquisition.  

In order to claim the exemption from capital gains on sale of immovable property under Section 54 (assuming the sale is of a residential house), you would need to deposit the gains in the capital gains account within the due date for filing the income tax return. 

You are also required to disclose the amount deposited in the capital gains account along with details such as date of deposit, account number and IFSC code of the capital gains account while filing the return of income. 

The amount is to be deposited in the capital gains account only to the extent of unutilised balance of gains to be reinvested in a residential house for claim of exemption under Section 54 or 54F (amount to be reinvested is the consideration from sale of asset other than residential house).  

The amendment in the Finance (No. 2) Act, 2024, permits the taxpayer to choose to be taxed at the rate of 20% with indexation, or 12.5% without indexation in case of gains arising from sale of long-term immovable properties on or after July 2024 if the properties were acquired before 23 July 2024. 

However, for the purpose of computing the exemption under Section 54, the amount of gains to be reinvested in the residential house (and deposited in capital gains account to the extent unutilised) shall be computed without indexation of the cost of acquisition.  

—Mahesh Nayak is a chartered accountant at CNK & Associates