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have an index value of 100.
In the current context, ‘tenanted’ refers to the property taken from the landlord on rent, almost permanently. “This is neither a long lease nor a leave and licence arrangement. There is a lump-sum down payment called Paghadi,” says Sampat.
In Mumbai for example, lakhs of properties in south and central Mumbai are tenanted even to this day. “As per Bombay Rent Act, it was illegal to take or pay Paghadi. However, as per Maharashtra Rent Control Act, 1999, Paghadi has become legal,” says Vimal Punmiya, a tax consultant. Barring a few official Paghadi transactions after 1994, most properties have no proof of this payment.
Let us take the example of a family that moved into a 200 sq ft room in 1966 as a tenant on Paghadi basis in the Opera House area of south Mumbai. In 2010, the landlord and the family signed an agreement to redevelop the property. The family agreed to give up the right of tenancy and get a 300 sq ft flat in return — now their own.
Some consultants say that in this case, the fair market value of the room as on April 1, 1981 should be calculated to determine acquisition cost and capital gain.
“The fair market value is calculated as per the Ready Reckoner rate of 1981. For the given location, the maximum is around Rs 1,200 per sq ft. Let us suppose the room is on the first floor without a lift and a view, one can consider the value at Rs 1,000 per sq ft, which makes it Rs 2 lakh. Usually the share of the landlord is 33 per cent and that of the tenant at 67 per cent, or Rs 1.34 lakh,” says Praksah Balu, a property valuer.
So, the indexed cost of acquisition would be Rs 1.34 lakh (fair market value) multiplied by CII of 2010-11 divided by CII of 1981-82. According to the table, the CII of 2010-11 is 711, and of 1981-82 is 100, which makes the cost Rs 9,52,740.
The market value (cost of sale) of the new 300 sq ft