• 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Currently, only the land has been bought(from funds withdrawn from the capital gains account) and  registered in our name.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 2 years ago in Capital Gains Tax

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.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

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

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

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.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

Invest in some under construction building and about to complete in next four months. Means 90% completion should have been completed.

Vivek Kumar Arora
CA, Delhi
3800 Answers
242 Consultations

5.0 on 5.0

You can invest in an under construction property whose construction shall be completed within 3 years of your date of transfer.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

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.

Vivek Kumar Arora
CA, Delhi
3800 Answers
242 Consultations

5.0 on 5.0

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

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Be in same deal ...You can take benefit of exemption by providing apt clarification since situation was not under your control.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Unfortunately no. They will be considered as improvement to the existing property and not make the existing property itself "under construction."

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

You can avail phone consultation for further discussion.

Vivek Kumar Arora
CA, Delhi
3800 Answers
242 Consultations

5.0 on 5.0

No, in my opinion it will not help you.

The only option is to buy under construction property.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

According to me, this can be done to allow exemption. However, there may be diverse views on this.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

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.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Modification on existing property is not construction of new property.

Vivek Kumar Arora
CA, Delhi
3800 Answers
242 Consultations

5.0 on 5.0

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.

Vishrut Rajesh Shah
CA, Ahmedabad
773 Answers
22 Consultations

5.0 on 5.0

It seems your query has already been answered. .In case of further clarification required plz contact.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Hi,

Structural changes in an existing property does not constitute to be an under construction property.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
27 Consultations

5.0 on 5.0

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

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

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