Capital gain tax on sale of redeveloped house

My mother had purchased a flat in year april 1997 on realization of her share of father late mr. s.r. krishnan  adarsh nagar, worli, mumbai-400025 for the sum of rs.4.75,000/- lakhs. as the said flat was in a very bad condition the bath room & toilet work & kitchen modifying  with granites & also mosaic flooring & electrical work was carried out for 10 lakhs.  to look some what presentable during the "deluge". in 26 july"2005 as we were in the ground floor the floods had wiped out everything & we have again have to shed another 5 lakhs. it can be also called as ancestor property because the fund was inherited through her father late s.r.krishnan. (as per the "will') .

in the year 2008 it has gone for redeveloment with all the consent of the society took five years to re-development process. it has been handed over by the builder only in the year 2013. as we have been staying there for the past 19 years there was no question of buying from the builder. builder has just redeveloped and handed over the flats to
all the old society members. the builder has not sold his flat to the old members  but 'just handed over" after re-development.

the flat was eventually sold on feb 2016 for a sum of 80 lakhs. though the flat of chembur was sold for 80.00 lakhs. the following expenses were incurred during the sale proceeds.
1.brokerage+rs.80.000/-(1% on 80.00lakhs)
2.expense incurred to take print out of attested copy of registration(since original registration copy was held by the builder):rs.20,000/-
3.tds paid 1% on the said registration value:80,000/-(the form 26qb & form 16 b is present.

Out of That, My mother Purchased a Flat at Kharghar & further 5.00 LAKHS SPENT TOWARDS WALL UNIT(SHOW CASE) & OTHER NECESSARY FURNITURE and plumbing work.

Rest of the amount, my mother wants to give me as Gift to be put into my account to enable me to purchase the Flat in my name. Most Important Question.

Will it Attract Capital Gain tax?

If yes, what are the ways and means to Save the Tax. In case the Balance amount is to be invested in second Property itself, Can it be under me and my Wife's name?

Asked 1 year ago in Capital Gains Tax from Mumbai, Maharashtra
Dear Vinod,

AS you mentioned that at the time of redevelopment flat was not sold to the builder. However it is very unlikely. We need to see the agreement between you and builder and related documents. If it was not sold to the builder what was the consideration for builder for redevelopment of houses? However for the time being i am assuming that it was not sale and based on that assumption question to your main answer is as follows:

Sale of flat in 2016 - 

Sale of flat for Rs. 80 lacs will definitely attract capital gain taxes. However, your mother can avail exemption under section 54 for the amount of 30 lakhs invested in new house.

Calculation - Assuming spent of 10 lacs was in the year 1997-98

	Sale consideration	                  8,000,000 
Less	brokerage 	                              - 80,000 
	reg. exp	                                       -20,000 
	Net sale consideration	           7,900,000 
Less	Indexed cost of acq.	           -1,551,284 
	Indexed cost of improvement -1	 -3,265,861 
	Indexed cost of improvement -2	 -1,087,525 
	Capital Gain	                                  1,995,330 
Less	Exemp[tion uinder section 54	          -1,995,330 
	Taxable capital gain	                              Nil 

Feel free to get in touch with me in case you require any assistance.

Thanks and Regards,
Abhishek Dugar
Abhishek Dugar
CA, Mumbai
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I would suggest you to scan the copies and mail it on my email id i.e. 

Further, your mother can gift you the remaining amount. It will not attract any taxes. It is advisable to prepare a gift deed for the same on the stamp paper.

We can assist you on the above.

Thanks and Regards,
CA Abhishek Dugar
Abhishek Dugar
CA, Mumbai
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Dear Sir,

Considering the facts provided by you, based on the Figures provided it appears that NO LTCG is payable in your case. (Assuming that the Old Flat was not sold to your builder and also that you have maintained all the documentary evidence regarding the Improvement Expenses i.e (Rs.10 Lacs + Rs.5 Lacs) - for repairs of your flat in both the cases.)

And yes, your mother can surely gift you the Balance Proceeds without paying any taxes, but on a safer side please  prepare a Gift Deed on a stamp paer and keep it handy for any further confirmations from the Income Tax department.

Trust this clarifies your query. 

Feel free to get back/ call back for any further clarifications. 

Thanking You. 

Rohit R Sharma
Rohit R Sharma
CA, Mumbai
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With effect from assessment year 2015-16 exemption can be claimed only in respect of
one residential house property purchased/constructed in India. If more than one house is
purchased or constructed, then exemption under section 54 will be available in respect of
one house only. No exemption can be claimed in respect of house purchased outside

Exemption under section 54 can be claimed in respect of capital gains arising on transfer
of capital asset, being long-term residential house property. Exemption under section 54
will be lower of following :
• Amount of capital gains arising on transfer of residential house; or
• Amount invested in new residential house property

Trust this will solve your issue.

For savings tax you need to increase the cost of new property like you can show some more additions to the flat.
Shyam Sunder Modani
CA, Hyderabad
1373 Answers
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and Gift deed is strongly recommended.
Shiv Kumar Agarwal
CA, Delhi
225 Answers
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