Sale of a redeveloped property in Mumbai

- It is a long term capital asset

- Cost of acquisition would be the actual cost of acquisition or stamp duty value of the property as on 01.04.2001 (at the option of the taxpayer) whichever is higher. Benefit of indexation is applicable.

-  Cost of redevelopment (only capital expenditure) would be applicable subject to availability of invoices/receipts for capital expenditure incurred

- Transfer expenses are deductible from sale consideration

- As the gap between the house purchased in the year 2021 and prospective sale of flat in 2023 is more than 1 year therefore no benefit of exemption

- You can invest in capital gain bonds upto Rs. 50 lacs within six months from date of transfer of flat or on purchase of another flat

For detailed discussion you may opt for phone consultation

1. Determining the Property's Initial Value: For your redeveloped Mumbai flat, the starting point of your financial assessment involves choosing between two values:

   • 
     Original Purchase Price: This is the amount you paid when you first bought the property.
   • 
     Value Based on Stamp Duty in 2001: If the property's value as determined by stamp duty on April 1, 2001, is greater than the original purchase price, you can opt for this value.

   The higher of these two figures is the one you should use. You also have the advantage of using indexation, which adjusts your purchase price to account for inflation over time.

2. Redevelopment Expenses: Costs that you incurred specifically for the property’s redevelopment can be added to your financial calculations. However, these expenses must be capital expenditures, directly related to property enhancement, and should be supported by appropriate documentation like invoices or receipts.

3. Deductible Sale-Related Expenditures: Any expenses arising from the sale process, including legal charges or broker fees, can be deducted from the sale proceeds of your flat.

4. Nature of Capital Gains: The sale of your flat, scheduled for December 2023, falls into the category of long-term capital gains. This classification is due to the duration you’ve held the property, which exceeds one year since your purchase of the current residence in 2021.

5. Alternative Tax-Saving Strategies: While purchasing another house won't offer tax relief in this case (as the interval between acquiring your current residence in 2021 and selling the redeveloped flat in 2023 surpasses one year), you can still explore other tax-saving avenues. One notable option is investing in capital gain bonds. You can invest up to Rs. 50 lakhs in these bonds within a six-month period following the sale of the flat, which can aid in reducing capital gains tax.

Please let me know if you need any other clarification!

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Did you undertake any agreement in case of redevelopment?

Did you pay any capital gain tax when you received the redevelopment flat?

- Does redeveloped flat arised due to JDA (Joint development agreement)?

1. Original Property Purchase Date: The key factor in determining whether the gain is long-term or short-term is the period you have held the property. Since you have owned the original property since 1974, this is the date that is generally considered for calculating the holding period.

2. Redevelopment and Possession Dates: The redevelopment of the property and the date of taking possession of the redeveloped property in June 2023 do not reset the original purchase date. The redevelopment is seen as an improvement to the existing asset, not the creation of a new asset.

3. Long-Term Capital Gains: Given that you have held the property since 1974, the sale of the flat in December 2023 clearly exceeds the requirement of holding the property for more than two years, which is the criteria for long-term capital gains. Therefore, the sale would be classified as long-term capital gains.

Please let me know if you need any other clarification!

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

1. Original Property Purchase Date: The key factor in determining whether the gain is long-term or short-term is the period you have held the property. Since you have owned the original property since 1974, this is the date that is generally considered for calculating the holding period.

2. Redevelopment and Possession Dates: The redevelopment of the property and the date of taking possession of the redeveloped property in June 2023 do not reset the original purchase date. The redevelopment is seen as an improvement to the existing asset, not the creation of a new asset.

3. Long-Term Capital Gains: Given that you have held the property since 1974, the sale of the flat in December 2023 clearly exceeds the requirement of holding the property for more than two years, which is the criteria for long-term capital gains. Therefore, the sale would be classified as long-term capital gains.

Please let me know if you need any other clarification!

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

1. Original Property Purchase Date: The key factor in determining whether the gain is long-term or short-term is the period you have held the property. Since you have owned the original property since 1974, this is the date that is generally considered for calculating the holding period.

2. Redevelopment and Possession Dates: The redevelopment of the property and the date of taking possession of the redeveloped property in June 2023 do not reset the original purchase date. The redevelopment is seen as an improvement to the existing asset, not the creation of a new asset.

3. Long-Term Capital Gains: Given that you have held the property since 1974, the sale of the flat in December 2023 clearly exceeds the requirement of holding the property for more than two years, which is the criteria for long-term capital gains. Therefore, the sale would be classified as long-term capital gains.

Please let me know if you need any other clarification!

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Why was there no capital gain when the property was received after redevelopment.