Sir/ madam, I have finalised purchase of a under constructed flat in 2011. For allotment letter in 2011. The flat was ready by Feb 2013 and started fit meant work. Took formal possession by Aug 2013 and finally on registered the flat on 26th Mar 2014. Total value of flat is 32 Lacs. Registration and sale deed. cost 4 lacs. Club electricity etc was another 1 lacs, Flat upgradation was 1 lacs which include painting / carpenter / electrical etc( But no bills available as done in Year 2013). So total cost : 38 Lacs I sold the flat on 5th June 2019 at 57 lacs out of which 1 lac was given to agent and Rs 50000 was spent for travelling to do registration. Can you suggest what will be the date of acquisition and after indexing what will be the capital gain ????
Also suggest how to get exemption to any applicable LTCG ??
Dear Sir,
Hope you are doing well !!
The starting date for the holding period also continues to be a matter of litigation because of different rulings from high courts and Income Tax (I-T) tribunals. The most common view, however, is that the date of allotment should be considered for determining the holding period rather than the date of possession.
After indexing, there would be capital loss.
You are not required to pay any capital gain taxes.
There are numerous slabs and sections under which you can save on tax if you reinvest your long-term capital gains (In your case, it is capital loss- there is no need to reinvest the amount):
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.
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.
Section 54F: 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 thse sale. For under-construction properties, the new property should be ready within three years of the asset’s sale.
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.
This is just for your information.
Hello,
The date of the allotment of the flat will be treated as the date of acquisition.
After indexation, there would be a capital loss of Rs. 2.68 Lakhs( considering flat up-gradation as part of the cost of improvements, though no bills are available)
No tax is to be paid.
I hope that this answer satisfies your requirement.
Regards,
CA Hunny Badlani
Since there is capital loss, there is no need for reinvestment for exemption.
Hello Sir,
-The date of allotment letter would be considered as the date of acquisition.
-There would be capital loss of Rs ~ Rs 6.6 lakh.
It is calculated as below:
Sale consideration -Indexed COA- transfer expenses = (Rs 57 lakh- Rs 62 lakh-Rs 1.5 lakh)= - Rs. 6.6 Lakh
The indexed COA= Rs 36 lakh /167*288= ~Rs. 62 lakh.
There is no need for reinvestment to get exemption as it is a capital loss.
You date of acquisition would be date of allotment letter but indexation of cost would depend on the date when you have made the payment.
The amount paid for flat upgradation wont be allowed as deduction as you dont have proper bills.
Also you wont get deduction of amount spend for travelling as its not directly related to sale of flat.
If you need proper calculation of capital either provide date wise detail of transaction or have a personal consultation.
You can take exemption under 54 by investing in another flat with 2 years or construct a flat within 3 year but if you cant use the amount before filing return for FY 2019-20 then you need to deposit the same in Capital gain account scheme to get exemption.
Or you can invest in bonds u/s 54EC within 6 months of sale.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Hi,
Although there are different school of thoughts with respect to date of allotment, but moat of the tax rulings suggests that date of the allotment letter should be treated as the date of acquisition.
There would be a capital loss in your scenario and hence no capital gain tax liability arises.
Since, there is no capital gain tax, you dont meed to reinvest the money to save capital gain tax.
- Date of acquistion will be 26.03.2014. LTCG would be 8.70 lacs. Tax would be 1.81 lacs. Do you have any other income also?. Invest in bonds or house property.
