• Capital gains tax on sale of immovable property and its return filing

Me and my wife sold an immovable property.we received 30 % of total sales consideration in March 2018 and remaining amount in April 2018. Date on agreement to sale is of March 2018 but TDS deducted and deposited by buyers is in April and July 2018. Further the TDS amount is reflected in our respective form 26AS for FY 18-19 .My questions are as below :

1. In which financial year, this sale should be considered for return filing, FY 17-18 or FY 18-19 ?

2. What could be pro and cons of filing return in both the years ?
Personally we will prefer FY 18-19 if it is possible to do so.

3. While calculating total indexed cost of acquisition, the payments made to builder before issue of allotment letter can also be indexed or not ?
(For info : This was an under construction property booked in March 2010, allotments letter issued in July 2011, builder buyer agreement executed in October 2011, possession taken in February 2018 and sold in March - April 2018 before registration in our name. Payments were made as per construction stage. Hence going for Long term capital gain.)
Which

4. While calculating total indexed cost of acquisition, we are also adding interest paid on home loan for all years as we have not claimed any income tax rebate on housing loan interest in previous years
Can we consider indexed value of interest paid on home loan while calcuting total cost of acquisition ?

Indexing of payments made before issue of allotment letter and indexing of home loan interest paid reduces the long term capital gain significantly in out case.
Asked 5 years ago in Capital Gains Tax

Hi,

Hope you are doing well !

Please find below the responses:

1. It should be considered from date of transfer/date of registration. I understand that the property was sold in FY 2017-18. So, FY 2017-2018 should be considered as return filing for sale.

2. No, you have to show sale in FY 2017-18.

3. Yes, the payments made to builder before issue of allotment letter can also be indexed. However,in this regard, there can be various views. One view can be the date when the initial advance is given by the intended buyer. The other view can be taking the date when allotment letter is issued to the intended buyer after the project has been properly described.

4. Yes, you can if the loan is used entirely for the purpose of acquisition of concerned property then it can form part of purchase cost.But it is a debatable point and is subject to litigation, so your AO may not allow your claim and you will have to file an appeal. However,there are various case law in which interest on loan is allowed to treat as cost of acquisition.

Example : CIT Vs. K. Raja Gopala Rao (2001 252 ITR 459 Mad)

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi

1 n 2. Consider the FY in which the property is registered. So, date of registration is the relevant date.

3. Yes, indexing with the year of allotment.

4. Yes, interest cost shall also be indexed.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Hi,

Can you please clarify in what sense you are asking pro and cons of filing return in both the years .

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

Means there are some case laws decisions in favour of using the indexation of payment made before date of allotment as well as against this.

So, you may take the benefit of indexation of payments made before the date of allotment.

**Law is not clear on this point as well as on indexation of interest cost to be part of cost of acquisition. Both points are debatable and subject to litigation.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Dear Sir,

1) It should be treated as transfer for the F.Y. 2017-18 and capital gain should be calculated for the F.Y. 2017-18. You need to show the amount in the ITR of A.Y. 2018-19 and that is 100% amount but the challenge would be of TDS credit. You can only claim the TDS in A.Y. 2019-20 without any declaration of capital gain in A.Y. 2019-20 because the whole amount is taxable in A.Y. 2018-19 but your 26AS of A.Y.2019-20 would reflect TDS on 100% amount and sale proceeds of 70% amount which would be a challenge and you will receive the intimation u/s 143(1)(a) of the Act for the adjustment of the difference.

2) Yes you can indexed the cost incurred before the issue of the allotment letter subject to litigation.

3) Yes you can consider the interest on housing loan as COA if other benefit of interest on housing loan is not availed by you under other provisions of the Act.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

5.0 on 5.0

Hi

With relation to the 1st question, since there is no point of date of registration here, date of sale agreement shall be considered.

So, the capital gains shall arise in FY 17-18 only.

The TDS of first installment should be reflected in 26AS of FY 17-18 as the payment date is March 18. Check again with the same.

There would be an income mismatch as payments are in 2 different FYs, expect a notice for clarification. Had the capital gains been taxable for FY 18-19, showing the same in ITR would have been easy.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Hi,

Please find below the response to your queries:

1.FY 2017-2018 should be considered for return filing for sale.

2. No, you will need to reflect in the FY 2017-18.

3. Yes, you can take the indexation benefit.

4. Yes you can, but it may be subject to litigations.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi,

Hope you are doing well !

All this queries cannot be clarify on this platform.

We may be provide you relevant answers but that won't be suffice.

You need to take proper consultancy from practicing CA who are dealing with all this situation.

Sorry for inconvenience.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

1. Since the sale happened in March 2018, you will have to show it in your return for FY 2017-18.

2. Filing return in both the years dont have any cons. But you can show sale of property in both the years.

3. Yes, payment made to the builder for acquiring the house will be indexed whether given before or after the allotment letter.

4. Yes, it can be considered.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Get the first Form 26QB corrected. Ask the buyer for correction so as to get TDS in 17-18 only.

Litigation for interest allowability is favourable for you and chances of litigation is minimum. It's a favorable case.

It is expected that TDS issue shall arise in FY 18-19 only. We may help you with resolution of such litigation/ intimation.

It would be dealt by a CA.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

I dont foresee any major litigations.

The issues can be handled by a practicing Chartered Accountant.

Regards,

Nikhil

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Dear Sir,

1) Consequences would be payment of tax and interest on tax for the cost portion not considered by the AO.

2) Refer the case laws of your jurisdiction to avoid above circumstance.

3) You will be required to file a reply online and off line to justify your case in case of notice/intimation.

4) CA will deal better than lawyer in this matter.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

5.0 on 5.0

Dear Sir,

It is not possible. Either ask the buyer to correct the challan assessment year or you need to show capital gain this year and pay tax from your pocket. In next year, get the refund of TDS deducted. Next year you need to file reply for the notice due to mismatch of income in ITR and 26AS.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

5.0 on 5.0

Sorry, it was a typo error. I meant "But you can't show Property sale in both the years".

You will have to show sale in your return for FY 2017-18.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi,

I dont think this question was meant for me. So would abstain from commenting.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

No. That is not possible.

You need to show the entire sale in FY 2017-18 only.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Filing return in both the years dont have any cons.

The above statement means there is no harm in filing return in FY 2018-19 also. You can show your other incomes in return of income.

In fact it's will be good if you file the return if income in FY 2018-19. You can claim back the TDS deposited by your buyer.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi,

It is not possible to show sale of property in both the years.

Please check the same with the concerned person.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

It seems you query is already answered .Please feel free to follow up in case of further clarification required.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

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