Sir, I purchsed a flat from greater noida authority under residential scheme. The flat was alloted to me in 2014 and paid full cost of flat as down payment. But still not got possession. Due to delay in possession and pressure from allottees, authority has now given option to willingly surrender the flat and 4%PA interest will be paid on the cost flat deposited by the allottees. My question as under:- 1. Whether Long term capital gain will be applicable on the interest received on surrendering of flat or it will be treated as intetest. What will be tax liability. 2. This flat was purchsed taking the benifit of capital gain. Now, will there be any adverse effect on the capital gain benifit taken to purchase of this property.
Hi,
Considering that the flat was taken for the benefit of capital gain, it is advisable not to surrender the flat. Although department may litigate your exemption claim whether you surrender or not but the chances of your winning are higher if you don't surrender the flat.
Further, if you surrender it, interest will be taxable as other income and not as capital gain.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
1) Interest will be taxable as income from other sources and not as capital gain.
2) Long term capital exempt earlier against such investment will be taxable now.
Hi
1. No. It would be treated as income from Other sources.
2. Since the flat under consideration was bought to claim exemption, it is advisable not to surrender the flat. This could make the case litigative. Although it's a genuine case for such exemption could not be denied, surrendering the flat could be against you.
Hi,
Please find below the answer to your queries.
1. Interest will be treated as income from other sources and not capital gains.
2. Yes, if you now surrender the flat, the capital gains exemption given earlier will be reversed and you will be liable to pay taxes. My suggestion is not to surrender the flat so that your exemption is not reversed. Additionally, the interest being paid by the builder is also not lucrative enough.
Hope that clarifies.
Regards,
Nikhil.
1. Interest will be taxed as income from other sources
2. Surrendering flat will reverse the benefit you had claimed earlier. Not advisable to do the same.
Dear Sir,
In case, you have your builder buyer agreement and your allotment letter is also there, in that case it will be the situation of Capital gains which is simply taxable @20% and you can also eligible for Indexation benefits on your Cost of acquisition.
In the above case, there will no harm of extinguishing your rights, as there is a limitation of 3 years of holding the new property purchased and the same condition is satisfied in your case.
Thanks
CA Sourabh Pahuja
