I sold my 2nd home in Mumbai, which is a residential property in Jan 2014 and incurred a capital gain for 2.2CR. In June of 2014 I purchased a flat for 3CR on allotment basis (no stamp duty was paid, however Service tax and MVAT we paid) which I utilised my 2.2CR capital gains on, in order to take advanctage of Capital Gains Exemption. Due to negligence from Builder side he did not allow me to register my Flat. Now the builder has offered to allow me to register my flat agreement and pay stamp duty in April 2020. Since my family is in dire need of money, I want to immediately sell this flat. If I register and pay stamp duty on this flat in April 2020, I and plan to sell the flat with no profit 1 month later in May 2020. Will my previous LTCG of 2.2CR be still considered Tax Exempt or will I need to hold the property for 2 years in order to get this exemption. I am scared that if i sell in May the ITAT will come after me saying you needed to hold this property for 2 years. Below i have sited an artcle which has states that Holding period starts from date of Allotment and funds recieved to builder. My Family is in dire need of money, but it will not be viable to pay the LTCG on 2.2CR + Compounded interest and Penalties. Please reference below article. https://realty.economictimes.indiatimes.com/news/regulatory/holding-period-of-house-starts-from-date-of-allotment-not-registration-itat/68770473
Dear Sir,
Hope you are doing well !!
The date of allotment should be considered for determining the holding period rather than the date of possession.
The property should be treated as long term capital assets.The capital gain should be treated as Long term capital gain.
So, your previous LTCG of 2.2 CR will be considered Tax Exempt.
Please share copy of allotment with us.
Hey Payal, Thanks so much for the clarity. Could you advise me under what Section of the IT Code this would follow under so I can throw it at my CA for a double opionion. Also would i be able to get a refund for stamp duty? Do you do any work with US IRS FBAR AND FATCA? I am also looking for possible help with Liberalised Remittance Schemes
The starting date for the holding period also continues to be a matter of litigation because of different rulings from high courts and Income Tax (I-T) tribunals. The most common view, however, is that the date of allotment should be considered for determining the holding period rather than the date of possession.
There are many case laws in favour for the same.
Yes, we may assist you in entire procedure.
It is advisable to take a phone consultation for detailed discussion.
When did you get the possession?
Do you have any letter stating that you had received the possession?
Did you purchase a completed house or an under construction house?
If it was a completed house and the possession was provided and you have the paperwork relating to same then the original capital gain can be exempt and current capital gain would also be long term.
However the same would be subject to litigation.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Hello,
The date of the start of the period of holding for an assessee is a matter of litigation. However, there are various case laws in favour of the assessee where the date of allotment is held to be the date of start of the holding period.
If you can justify the allotment or possession of the property, the LTCG exemption would stand.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Hi
Please note that while technically one can argue that date of acquisition will be the date of allotment but tax authorities at lower level may create some issues out of it and may try to deny your previous exemption. Based on my experience, you will have to fight out this case atleast till itat level then.
