New Delhi, May 28 -- Tax on capital gains has long led to disputes in many areas. One such area is capital gains from the sale of leasehold or tenancy rights. Selling tenancy rights is quite common in Mumbai, where several tenanted properties are undergoing redevelopment.

It is an accepted legal position that such rights are capital assets and thus liable for capital gains tax. Capital gains on the transfer of leaseholdrights is computed by taking into account the sale consideration received on the transfer of such rights and deducting the cost incurred for acquiring these rights.

Deemed sale consideration introduced in 2003

In 2003, the Indian Income-tax Act added a rule (Section 50C) stating that if you sell a property (land, buildin...