Hi, I have recently sold a property in Chennai and about to sell another property in Chennai. Here are the following details: Property 1 (Apartment): Location: Chennai Year bought: 2004 Price bought for: Rs 8,50,000 (as per the sale agreement but lower value according to the sale deed like any new property where the sale deed shows only the Undivided Land Share cost. However between construction agreement and sale deed the total value of 8.5L can be shown) Sale price: Rs 33,50,000 Status when bought: Resident through a resident home loan Property 2 (Apartment): Location: Chennai Year bought: 2012 Bought as used flat one year old Price bought for: Rs 32,50,000 (as per the sale agreement but lower value according to the sale deed of 21.8 L. However proof of payment for 32.5L can be shown) Sale price: Rs 22,00,000 Status when bought: Non Resident through a Non resident home loan Key ask: - I presume there's no capital gains payable as the profit on property 1 neutralises loss on property 2 - Property 2 is already sold in Dec 2020. Do I need to ensure I sell property 1 before end of Mar 2021 to avail the capital tax benefit as mentioned above. My email address is [deleted] and I live in UK. Regards Jay
Hi Jay
Yes, you can offset the capital loss from one property against capital gain from another property.
It is not mandatory to sell the other property in the same year.
You can file ITR for FY 20-21 with capital loss. This capital loss shall be carried forward and would be available for set off against capital gains in future years.
Kindly ensure that the ITR is filed before due date to carry forward the loss.
We may assist you with filings and other compliance.
Thanks for your reply. A couple of questions: - What's the CGT loss that I can carry forward based on the information I had provided above. - How much will be the CGT gains that I would incur from property 1 that I intent to sell - When is the last date to submit ITR assuming I sold the property last month (Dec 2020).
Dear Sir,
Hope you are doing well !!
Property 1:
There would be capital gain of Rs ~ Rs 10.85 lakh.
It is calculated as below:
Sale consideration -Indexed COA = (Rs 33.50 lakh- Rs 22.65 lakh) = Rs. 10.85 Lakh
The indexed COA= Rs 8.5 lakh /301*113= ~Rs 22.65 lakh.
Property 2:
There would be capital loss of Rs ~ Rs 27 lakh.
It is calculated as below:
Sale consideration -Indexed COA = (Rs 22 lakh- Rs 49 lakh)= - Rs. 27 Lakh
The indexed COA= Rs 32.50 lakh /200*301= ~Rs. 49 lakh.
So, you can set off the capital loss upto Rs 10.85 lakh against the gain from property one and carry forward the remaining loss of Rs 16.15 lakh for next AY.
-Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry i.e 31st July 2021.
We may assist you in entire procedure.
It is advisable to take a phone consultation for detailed discussion.
Please note that the Income Tax does not allow loss under the head capital gains to be set off against any income from other heads – this can be only set off within the ‘Capital Gains’ head. Long Term Capital Loss can be set off only against Long Term Capital Gains. Short Term Capital Losses are allowed to be set off against both Long Term Gains and Short Term Gains.
Fortunately, if you are not able to set off your entire capital loss in the same year, both Short Term and Long Term loss can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed.
Also,you cannot be carried forward the losses if the return is not filed within the original due date .
We may further discuss the issue in detail over call.
Thanks Payal for the detailed response. Just have a follow-up question on what's taken as the original purchase price (sale agreement or sale deed). Copy pasting below for both properties: Property 1 (Apartment): Price bought for: Rs 8,50,000 (as per the sale agreement but lower value according to the sale deed like any new property where the sale deed shows only the Undivided Land Share cost. However between construction agreement and sale deed the total value of 8.5L can be shown) Property 2 (Apartment): Price bought for: Rs 32,50,000 (as per the sale agreement but lower value according to the sale deed of 21.8 L. However proof of payment for 32.5L can be shown)
- Value as per sale deed will be considered final.
- In case of property 1, there will be a LCG of Rs.10.86 lacs.
- In case of property 2, there is a LCL of Rs.10.81 lacs which you can carry forward and set off with property 1 loss.
- As both the properties were purchased through home loan, if benefit of interest element is not taken under other sections then you ca consider it as a cost of construction.
- Transfer expenses like brokerage, mutation, legal and vetting expenses can be deducted from the sale consideration.
- Cost of improvement should be supported by proper invoices.
- As the property is sold in Dec. 2020 i.e. F.Y. 2020-21, last date for filing of ITR is 31.07.2021.
For detailed discussion, please consult telephonically.
Hi
Please specify what was the value of the properties in the registered deed on which stamp duty was paid.
If property 1 value was 8.5 and property 2 was 32.5, capital loss on second property would be approximately 27 lacs and capital gain on first property would be approximately 11 lacs.
You can book a phone consultation to discuss the whole case in detail and in one go.
Thank you
