I want to sell my redeveloped flat and save taxes

I want to sell my redeveloped flat and save taxes

Our dilapidated building was redeveloped and we had a PAA agreement with the builder in Jan 2015. Old property belonged to trust and was rented by us since its inception from 1965. It was given on rent to us by the trust.

Now i wish to sell my redeveloped flat on or after 01/04/2017 as after 1st april long term capital gains will be considered after 2 years.

Show me some way that i can sell my property and pay minimum or no capital gain. i require the money for my medical expenses.

Asked 8 years ago in Capital Gains Tax

possession of property will be given in march 2017.. i.e after one month from now.. so what is advisable ... selling it before possession or after??

Asked 8 years ago

i am getting different opinion from CAs..one of the opinion is that i take a fair market value and pay ltcg on the remaining amount or invest the remaining amount in capital gains bond...
the other advice which i get is that it cannot be classified under ltcg as i am not waiting for 2 years after possession.. some say date of PAA agreement is to be considered for calculating holding period... some say as it was an old property so i qualify for ltcg...
some even say that i will have to pay ltcg/stcg on the whole amount as there is no cost of aquisition.. there are numerous court judgements with contradictory judgements
it is really confusing.. please help with a detailed answer.

This article by Mr A N Shanbhag says there is no capital gains whatsoever
http://www.freepressjournal.in/business/dealing-with-redevelopment-issues-a-n-shanbag/874331

Asked 8 years ago

    Finally, and most importantly, notwithstanding all observed above, note that —

Supreme Court had held in the case of B. C. Srinivasa Shetty, 128 ITR 294 that no capital gain arises on transfer of capital assets in respect of which there is no cost of acquisition. This decision is being negated steadily u/s 55 by ordaining that capital gains shall be computed and charged to tax by taking the cost of acquisition as nil in the following cases —

(a) Goodwill of a business (not of a profession).

(b) Trademark or brand name associated with the business.

(c) Patent, copyright, formula, design, etc.

(d) Right to carry on any business.

(e) Route permits.

(f)  Loom hours. And finally,

(g) Tenancy rights.

This implies that where the cost of acquisition of an asset is nil, no capital gain arises on transfer of capital assets, unless the asset belongs to the categories as stated above.

The redeveloped flat is not covered by any of the items listed above, including the item ‘g’.

Consequently Mehta is not liable to pay any tax either on the first transaction or on the second.

Asked 8 years ago

As the property belonged to the trust, do you have right to sell and use the proceeds? The LTCG will have to be paid by the Trust and not by you, even if you have received the money, because it is an appropriation of income. However, if the Trust has given the ownership rights without transferring the property in your name, there should have been some document to evidence such relinquishment of the rights in your favour. The cost of acquisition will have to be calculated from that date.

As the property belongs to the Trust but there was transfer of beneficial ownership in your favour, with or without proper documentation, it amounts to gift in your favour, whether the mutation was recorded in the Revenue records, as deemed transfer in your favour. As this is a gift, the cost to the previous donor will be the cost in your hands, as the donee.

B Vijaya Kumar

CA, Hyderabad

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trust sold the land to a builder and we got Permanent Alternate Accommodation Agreement in our name with proper allotment and flat number.. so now it is under my ownership

Asked 8 years ago

PAA agreement was registered in my name on Jan 2015 and ownership of the flat is in my name

Asked 8 years ago

my question is if sell on 1st april 2017 which tax will apply ltcg or stcg..  and what will be my cost of aquisition

Asked 8 years ago

When the trust sold the lands to the builder and you got Permanent Alternate Accommodation, what was the consideration paid by you. You would not have paid any consideration, as the allotment of the flat is done in your favour, to enable the trust to sell the land to the builder. Otherwise, it would not have been possible for the Trust to terminate the rental arrangement, whether documented or not. Hence, the value of the property should have been the deemed gift to you.

In my view, the cost to the donor will be the cost to you, which you can use it for the purpose of computation of Capital Gains. However, the PPA was executed in January 2015. Hence, the market value of the flat on the date of PPA is the cost to the trust, which is the cost of acquisition to you. So if you sell the flat after 1/4/17, it will be LTCG for you.

Another additional issue to be considered is the impact of Section 56(2)(vii), which brings into tax net the stamp duty value of an immoveable property transferred without consideration.

B Vijaya Kumar

CA, Hyderabad

1028 Answers

124 Consultations

Talk to B Vijaya Kumar

I would advise to make it after 01.04.2017 only

Vishrut Rajesh Shah

CA, Ahmedabad

950 Answers

39 Consultations

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