• Capital Gain on Residential property


I bought apartment under construction in year 2010 June. Its was agreement done on stamp paper ( not registered) . As the construction progressed i kept paying amount to builder. The actual registration was done in 2014 March at registerer office paying stamp duty etc with full and final statement.. Later I sold the apartment June 2016.

here the builder gave possession letter dated March 2013.

I would like to know if this shall be considered as STCG or LTCG. And which is the year i need to consider 2010 or 2013 or 2014 .

Kindly help.

thanks & regards
Asked 1 year ago in Capital Gains Tax from Mumbai, Maharashtra
Dear Rakesh,

The date of acquisition would be March 2013 and it will be a long term capital gain (since holding period is more than 3 years).

Please feel free to call/ revert in case of any doubts

Thanks and Regards
Abhishek Dugar
Abhishek Dugar
CA, Mumbai
2774 Answers
112 Consultations

5.0 on 5.0

Point to be considered here are
First, does an assessee acquire an asset by booking a flat Capital asset has been defined to mean property of any kind. Hence, a right to obtain conveyance of an immovable property can be construed as a property. Accordingly, if the booking agreement and allotment terms of the builder give a right to obtain conveyance on the flat, that itself will be an asset under the Income Tax Act.

Second, whether the gain on transfer of such rights in the flat or on transfer of the flats after talking possession thereof is short term or long term The deciding factor is the date of acquisition. Indian tax authorities are giving priority to the facts of the case. It has been held in various rulings that the crucial date is the date of allotment of the residential flat and the payment of instalment is merely a follow-up action. Hence, the date of issue of an allotment letter / agreement to sell can be construed as the date on which the assessee has obtained the conveyance on the flat. 
so depending on the factor on which year you have obtained conveyance on the flat, that year should be considered as cost of acquisition of the flat for the purpose of the capital gain.
Vishakha Agarwal
CA, Bangalore
431 Answers
56 Consultations

5.0 on 5.0

Hello Rakesh,

As per your question your query is what should be the date of acqusition for the purchase of capital asset? Whether it would be long term or short term.

As per various rulings the rights in the property arises at the time of issuance of letter of allotment. If in your case as you have mentioned the developer gave you an allotment letter at the time of paying advance then from that day the date of acquisition shall be taken into consideration. 

Ans since the period would exceed 36 months it would fall under Long term capital gain.

For any further clarifications you may write or contact

Thanks & Regards

Ria Nagpal
Manish Nagpal & Co
Chartered Accountants
Ria Nagpal
CA, Ahmedabad
46 Answers
3 Consultations

5.0 on 5.0

As per our view you need to consider 2014.
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 Consultations

5.0 on 5.0

Dear Rakesh,

Such a case would be considered as LTCG, but it is subject to litigation so you may have to fight it out.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Rohit R Sharma
Rohit R Sharma
CA, Mumbai
2089 Answers
90 Consultations

5.0 on 5.0

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