Hi
What was the amount of capital gains? And how much money has been invested in the land?
Buying a ready to move on property would not allow the exemption.
Saving capital gains tax on property sale
We have sold a property in 2015 June and immediately parked the funds in a capital gains account. We invested in a house (gated community) from a reputed builder towards the end of 2015. As per the agreement, the constructed house was to be handed over in june 2017 with an additional grace period of 6 months. Currently, only the land has been bought(from funds withdrawn from the capital gains account) and registered in our name. The construction has been delayed inspite Of repeated follow-up. As on Feb-2018, the construction is yet to be started. Our 3 year time to invest in a property will expire in the next 4 months. Please suggest a way forward. We want to put a stop on construction because of the repeated delay and invest the remaining money(capital gains account) in a ready to move in property and save tax on at least this remaining amount ? We are willing to pay the tax on the money that went into the land originally...or is there a way to avoid this ?
Asked 7 years ago in Capital Gains Tax
Hi,
The time period to buy a ready property(2 years) has already been expired in June 2017. So buying a new ready property now will not help.
However, if you remain invested in this property there are chances that you may get the exemption even if construction got delayed beyond the circumstances in your control.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Thanks for the clarifications. The builder currently is not taking up the construction and hence we are looking at an alternate option as a desperate measure. Can we not showcase ours as a special case and invest in a new property ?
Asked 7 years ago
That would be very litigative case. Though at the end it should be allowed, but be ready to fight for it with the income tax authorities.
Invest in some under construction building and about to complete in next four months. Means 90% completion should have been completed.
Thanks Abhishek, Lakshita and Vivek for the clarifications. Vivek, For the 90% completed property...will it be fine if we get into a sale and construction agreement today and then the handover happens in 3 to 4 months time ? Please clarify.
Asked 7 years ago
You can invest in an under construction property whose construction shall be completed within 3 years of your date of transfer.
Law says it should be constructed within 3 years from the date of transfer. Whatever may be the percentage of completion it should be completed by june 18.
Hi,
I think there are 2 options that you have currently:
1. Remain invested in the property and claim exemption as the delay has happened not because of you and these were reasons beyond your control. In the past there have been cases where judgement has been passed in favour of the assessee under similar circumstances. Having said that this is not something which will be free from litigations. You shoukd be prepared to fight it out.
2 . The other option is to invest in a under construction property which is nearly completing in the next few months. But you need to be 100% sure that the possession is transferred to you before the 3 year timeline gets over and there should be no delay here.
Hope this gives you some clarity
Regards,
Nikhil
Be in same deal ...You can take benefit of exemption by providing apt clarification since situation was not under your control.
We are looking at some constructional changes on the property we intend to purchase. Do these modifications(constructional changes) on an existing house undertaken by the existing owner qualify as house undertaken construction ? We will take the handover of the house with the changes before the 3 year tenure expire. Please clarify.
Asked 7 years ago
Unfortunately no. They will be considered as improvement to the existing property and not make the existing property itself "under construction."
Regards,
Nikhil.
You can avail phone consultation for further discussion.
No, in my opinion it will not help you.
The only option is to buy under construction property.
According to me, this can be done to allow exemption. However, there may be diverse views on this.
Thanks everybody for all the detailed clarifications. Any suggestions on how to save tax on the partial money (withdrawn from the capital gains account) that is already spent on the land, where the construction has been held up by the builder ? Can I put back the money(equivalent to the money that was withdrawn for the land purchase) from my savings into the capital gains account ? For me, this will effectively mean that I have purchased the land from my personal savings. Now, I intend to use the total money in the capital gains account to purchase the under construction house. Is this approach acceptable ?
Asked 7 years ago
I don't think you can re-deposit the money now in the Capital Gains Accounts as the time has lapsed for you to contribute in it post selling the property in which Capital gains were made.
The amount withdrawn will become subject to tax.
Regards,
Nikhil.
Modification on existing property is not construction of new property.
Dear Sir,
The modification part shall also get cover along with the purchase cost and on total value benefit of capital gain can be availed.
It seems your query has already been answered. .In case of further clarification required plz contact.
Hi,
Structural changes in an existing property does not constitute to be an under construction property.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hello,
The constructional changes shall not be considered as a new house property.
So you may not be in a position to claim deduction for this property.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Ask a Chartered Accountant
Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
Ask a CA