• Info for computation of capital gain

Hello,
I currently own two apartments. Out of which I am planning to sell the older apartment.

And wanted to know two things:
What will be my capital gain tax that I would be liable to?Can I show the first apartment sale’s “capital gain” as an investment to my second apartment already purchased?Here is the required information that you may need to compute the same.

1. Purchase of First Property (from a builder):
1.1 Date of Booking Flat: 2nd Oct 2010
1.2 Date of Registration: 31st Oct 2015
2. Purchase of Second Property (from an individual):
2.1 Date of Sale Agreement: Aug 2018
2.2 Date of Registration: 24th Oct 2018
2.3 Loan Amount 70 Lakhs
3. Sale (Potential) of First Property:
3.1 Sale Agreement Date: 19th Sep 2019
3.2 Sale of Registration: Yet to happen. May take some time due to loan processing etc. Expected to happen by Dec 2019.

4. Value of first property paid to Builder through bank loan: 
4.1 Sale Agreement Value + 
4.2 Construction Agreement Value + 
4.3 Modification Charges
4.4 Total = 38Lakhs
5. Value of first property Registered in Sale Deed
5.1 On Guidance Value: 21 Lakhs
5.2 Registration Charges paid 1.43 Lakhs
6. Woodwork Expenses: 4.4 Lakhs (Only rough bills are there, no tax info.)
7. Value of Sale of First Property
7.1 Potential Sale Value 62 Lakhs

The Purchase of Second Apartment happened on 24th Oct 2018 and Sale Agreement of resale of the first apartment is done on 19th Sep. 2019. Sale deed may happen by Dec/Jan. Will I be able to show the capital gain as an investment in the previously purchased second apartment?
Asked 4 years ago in Capital Gains Tax

Hello,

 

Capital Gain would be around Rs. 18.76 Lakhs, assuming the date of purchase of the first property being sold as 31st Oct 2015.

 

Exemption from capital gain on sale of house property is available under Sec 54, where investment made in new house property before 1 year from the date of sale of the property is allowed as a deduction from the capital gain.

In your case, the new house property(second) is purchased on 24th Oct 2018, therefore to be eligible for the exemption you need to sale the first property up to 23rd Oct 2019. Till now you have only made the sale agreement, which doesn't constitute transfer since the whole payment is not received yet for the property.

 

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

 

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

What is the value mentioned in point 4?

I think your cost of acquisition for first property is 21 plus 1.43 lakh which is 22.43 and it will be indexed from 2010 if you have proper agreement with the builder and so your capital gain would be 62 less 38.8 which comes to 23.2 lakh capital gain.

You can get benefit of investing in new flat before one year if you have proper agreement of sale on [deleted] but it can attract litigation.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

The sale value as mentioned in query Rs. 62 Lakhs

minus the indexed cost of acquisition i.e. payment made to the builder Rs. 38 Lakhs ( this will be indexed up to F.Y. 2019-20)

 

Whether an agreement for sale can be taken as the date of transfer would depend upon the clauses mentioned in the agreement. One cannot merely take the registration date or sale agreement date as the date of transfer.

 

Sale agreements are conditional in nature and are also not registered in many cases. Agreement for sale no doubt creates certain enforceable rights for the purchaser, however, it does not transfer the seller's title to the purchaser. Only upon fulfillment of conditions backed by possession the property can be said to be transferred.

There are case laws in favor of both arguments, considering the agreement for sale and the registration date as date of transfer also.

Being on the safer side and away from litigation, you must complete registration of the property before the due date to claim the exemption.

 

 

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

Why would there be a difference in amount paid to builder in sale deed and sale agreement?

If sale deed doesn't includes the construction cost recovered by builder then based on construction agreement you'll get it's deduction also. But you won't get deduction of modification charges if you don't have proper bills.

As far as cost of acquisition is concerned there are various case laws which suggests that if prior purchase agreement was made and some payment was made then the agreement date can be taken as date of purchase for calculation of capital gain.

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Yes, you will be able show the capital gain as an investment in the previously purchased second apartment.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

The indexation would be considered from 2010 to 2019 subject to conditions.

 

However, you will not be able to take benefit of indexation on modification charges if you dont have proper bills. 

 

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

 

It is decided in many case laws that the indexation benefit should be given from agreement date.

 

So, the indexation would be considered from 2010 to 2019. 

 

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

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