Tax implications on sale of unregistered flat

Dear Sir,

Hope you are doing well !!

There are numerous slabs and sections under which you can save on tax if you reinvest your long-term capital gains.

Section 54

Under this section, you can avoid tax on capital gains from the sale of a house property if you reinvest the money to buy another property. You can claim tax exemptions under this section if you buy the new property one year before the sale or two years after the sale. In case it is under construction, the new property should be ready within three years of the old property’s sale.

To claim full exemption the entire capital gains have to be invested.

In case entire capital gains are not invested – the amount not invested is charged to as long-term capital gains.

This exemption will be reversed if you sell this new property within 3 years of purchase and capital gains from the sale of the new property will be taxed as short-term capital gains.

Section 54F

Under this section, you can avoid tax on capital gains from the sale of any assets other than house property if you reinvest the money to buy another property.

You can claim total tax exemption by using the money you gain from selling any asset (except a house property) to buy a house property, which needs to be bought one year before the sale or two years after the sale. For under-construction properties, the new property should be ready within three years of the asset’s sale. 

To claim full exemption the entire sale receipts have to be invested.

In case entire sale receipts are not invested, the exemption is allowed proportionately.
[Exemption = Cost the new house x Capital Gains/Sale Receipts]

This exemption will be reversed if you sell this new property within 3 years of its purchase or construction OR if you purchase another residential house within 2 years of the sale of the original asset or construct a residential house other than the new house within 3 years of the sale of the original asset. Capital gains from the sale will be taxed as long-term capital gains.

Section 54EC:

You can claim tax exemption by using the amount you gain from selling an asset to buy bonds issued by NHAI and REC.The bonds should be bought within 6 months of the sale of the asset. The maximum amount you can invest in this way is Rs. 50 lakh. It will lock your money for 5 years.

Capital Gains Account Scheme (CAGS):  if you do not get a chance to invest in a profitable property immediately and still want to save your long-term gains from being taxed, you can invest your capital gains in CGDAS by approaching any public sector bank. The timeframe for the purchase or construction of the property remains unchanged in this case as well. But you can utilise this account momentarily so that you save your gains from being taxed and have more time to finalise a property for reinvestment.

It is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond due date for furnishing return of income.

Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry.

You can take a phone consultation for detail discussion.

No sir 54F is available only for assets other than residential property.

But since the residential property you sold was not in your name so you can be eligible for 54F as you have sold rights in the property and not the residential house.

If you want I can aasass you in gilifi return of income.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Hi,

- Sale of flat by you to the third party is a transfer of capital asset. It is a relinquishment of rights in the property. The gain from such transfer is treated as capital gain.

- Sale consideration would be the value received from the new buyer and cost would be the amount paid to the builder. Litigation would be whether it should be treated as long term or short term. 

- If the sale will be treated as long term then you can exemption u/s 54 

Thanks

TDS can be redeemed by filing the ITR only.

If the flat was registered in your name then you would be eligible for section 54 itself but here as per my observation you were just having the dighriin the prooprop which means you had paid an amount to builder and entered into an agreement to purchase the flat in future but later you transferred your rights to another person so it's transfer of rights rather than flat.

You can redeem it by filing return of income.

If you need further explanation you can have a phone consultation.

Hi

Since you got the possession letter ,you have ownership on property. Capital gain will apply on sale .

Holding period will be counted from date of allotment letter.If its more than 24 months then LTCG ,otherwise STCG.

Sec 54/54F benefit is available only in case of LTCG.

in your case,Sec 54 will apply if its LTCG.

Hope it helps

Hi,

Section 54 is applicable on sale of residential house and section 54F is applicable on sale of any property other than residential house.

In my opinion, you had a right to buy the house which you transferred to someone else and hence capital gain is applicable and you can take section 54F exemption for sale of your right by investing in new residential house.

You can claim the TDS while filing your return

TDS can be claimed while filing ITR

Hello,

Yes, Capital Gain would be applicable. Such transfer is taxable as the relinquishment of an asset or rights therein.

Since you sold the right in flat, you will be eligible for exemption under Sec. 54F.

Regards,

CA Hunny Badlani

TDS can be claimed while filing ITR for the concerned year.