• Capital gain/investment income query

I have booked a 4 units in an upcoming project in Mumbai for Rs 1.8cr in 2012 and the builder has executed a MoU with me. A letter of allotment is also given to me. I now want to sell 2 of these units for Rs 2.80cr in July 2018, but the builder has not yet obtained occupancy certificate for the project. Is the Gain of Rs 1cr a capital gain or Investment Income ? If it is a capital gain, can this be invested in REC Bonds etc. Is there a GST impact on this transaction ?
Asked 4 months ago in Capital Gains Tax from Goa Velha, Goa
Dear Sir,

1) Transaction is liable to capital gain tax and payment of GST is builder liability.

2) Yes you can reinvest in REC bonds upto Rs. 50 lacs.

Thanks
Vivek Kumar Arora
CA, Delhi
1541 Answers
36 Consultations

5.0 on 5.0

Hi,

This will be treated as capital gains and you will be liable to pay taxes on the same.

Yes, you can invest the gains in REC bonds to be eligible for tax exemptions.

Regards,
Nikhil
Nikhil Khanna
CA, Mumbai
1290 Answers
15 Consultations

5.0 on 5.0

Hi,

It will be a capital gain and yes you can invest in REC/ NHAI bonds to claim exemption from capital gain tax. However, you cannot​ invest more than 50 lacs in bonds in a single financial year.

There is no GST impact. You don't need to charge GST on sale of flat.
Abhishek Dugar
CA, Mumbai
3569 Answers
158 Consultations

5.0 on 5.0

It will be an investment income under the head Other Sources as you dont call it a house property unless registered in your name. If registered a capital gain from the date of the registeration whether short or long term. Is it registered in your name as a fully completed unit or only land is registered? Depends on a lot of things. If at all a short term gain, no tax benefits available in REC bonds. Occupancy certificate has nothing to do with income tax but your possession certificate and the fact the property is in your name as a fully completed unit. Find me in linkedun amitnarula.
Amit Kumar Narula
CA, Bangalore
59 Answers

5.0 on 5.0

Hi

Such transaction shall be liable to capital gains tax. The gains shall not be Rs. 1 crore; proportionate costs shall be considered for 2 units and such proportionate costs shall be indexed.

Investment in REC bonds can be done for claiming capital gain exemption. However, investment in bonds can be done upto Rs. 50 lacs only and the bonds shall be redeemable after 5 years.
Lakshita Bhandari
CA, Mumbai
2127 Answers
68 Consultations

5.0 on 5.0

Hii,

Hope you are doing well !

Please find below the replies:

1. It is a capital gain.
 
2. Yes, you can invest up to Rs 50 lakh in REC bond for claiming the exemption. There is no GST impact on this transaction.

Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
871 Answers
4 Consultations

4.8 on 5.0

Hi,

Unless the property is constructed and handed over to you, it is not a residential property in your hands, rather a right to buy the property. If you sell this right to buy, then also capital gains arise, however you may not be able to take any exemption of REC bonds on this as the sale if not of residential property. Once it is handed over to you with completion certificate, then it is a residential property in your hand. 

Thanks
Damini
Damini Agarwal
CA, Bengaluru
269 Answers
13 Consultations

5.0 on 5.0

Yes capital gain will attract here,it should be computed ,as cost is for 4 units,it should be prop to 2 units . Indexation benefit can also be taken here.
Investment in Bonds can be done subject to max amount of 50 lacs with locking period of 5 yrs.

 GST is builder's liability in these case.
Swati Agrawal
CA, Indore
678 Answers
1 Consultation

5.0 on 5.0

Dear Sir,

1) Capital asset is right to an asset.

2) Yes it is an extinguishment of right.

3) If section 54EC is not applicable, take the benefit of section 54EE.

Thanks
Vivek Kumar Arora
CA, Delhi
1541 Answers
36 Consultations

5.0 on 5.0

This would mean a relinquishment/ astonish of right in the property which is covered in the definition of Transfer under the Income tax act.

Refer https://www.google.co.in/amp/s/taxguru.in/income-tax/taxability-capital-gain-sale-construction-property-nature-gain-date-indexation-availability-benefit-section-54-54ec.html/%3famp for a detailed discussion about classification of such transfer aa transfer of capital asset.


Post amendment by Finance Act 2018, 54EC still remains same for you. The exemption can be claimed. However the period of holding now has to be 5 years instead of 3 years as earlier.
Lakshita Bhandari
CA, Mumbai
2127 Answers
68 Consultations

5.0 on 5.0

Yes the asset is the right to an asset which you are now relinquishing..
Nikhil Khanna
CA, Mumbai
1290 Answers
15 Consultations

5.0 on 5.0

It will be treated as capital gains and the same is liable for tax

However, you can invest the gains in REC bonds to be eligible for tax exemption
Deepak Rathore
CA, New Delhi
31 Answers
5 Consultations

4.3 on 5.0

Yes,its extinguishment of right which attract capital gain.

You can invest in bonds under 54EC and exemption can be claimed under sec 54 also.
Swati Agrawal
CA, Indore
678 Answers
1 Consultation

5.0 on 5.0

Hii,

Yes, it is a extinguishment of right to an asset as a result of which capital gain would arise.

You can invest your long-term capital gains in certain bonds specified u/s 54EC You can invest a maximum of Rs 50 lakh in these bonds and investment should be made within six months from the date of sale. These bonds have a lock-in period of five years. 

Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
871 Answers
4 Consultations

4.8 on 5.0

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