Adjustment of capital gains on sale of flat
We are NRIs and have booked a flat in June 2016 ( Flat Allotment Letter dated 10th June 2016 ) in Chennai and have paid 25% project cost from own funds. Balance 75% is funded by loan to be paid by FI to builder as construction progresses. Possession is expected in Dec' 2017. UDS ( land share) + Construction agreement registration is scheduled to be done in Aug 2016. We also own 2 other flats in Chennai, one of which is occupied by family and the other is vacant. Ideally we would have liked to sell one of them to part finance the new flat purchase. However, since the resale market is not good now, we have no choice but to wait for another 6 months to sell one of the existing flats.
My question is, if we sell one house say in Jan / Feb 2017, can the capital gains be offset against the new flat already booked using Sec 54 provisions? Will the new flat booking qualify as 'purchase' for the purpose of being treated as ' purchase one year before the date of transfer...' Under Sec 54? We intend using the sale proceeds of existing house to pay builder the progress construction payments due before possession in Dec 2017 and thereby reduce our loan draw down. Does this proposal qualify for exemption under Sec 54?
Asked 2 years ago in Income Tax from Chennai, Tamil Nadu
My inlaws own a flat in Delhi. Owing to advancing age, they would like to sell it as they no longer reside in Delhi. They reside in one of our flats in Chennai owned by my husband. My question is, if they sell their Delhi house and use the proceeds to buy the house they are currently residing at in Chennai from my husband at arms length price, will there be trouble from IT dept? If this act is ok, We thought that we can use the sale proceeds that my inlaws pay at market price for my husband's Chennai flat, can be used to pay builder, part construction cost of the flat booked in June'16 as explained in my first question posted today.
Asked 2 years ago
No Sir, you cant claim the exemption under section 54. Section 54 allows the exemption in case of purchase not in case of construction.
Please feel free to call/revert in case of any doubts.
Thanks and Regards,
CA Abhishek Dugar
Yes the capital gains U/s. 54 can be setoff if the new property is purchased within one year from sale or two years after sale.
There will not be any problem as the sale proceed is used in purchase of property whether it is from your husband or from any other person. But that should be at the Government registered value minimum.
There is no issue in your parents selling the Delhi Property and in turn using the funds to purchase your property.
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.