Sale of Property B bought as Capital Gains investment from Property A

Hi,

if you invested the capital gain amount following all the conditions attached to it. in under construction property,

Then period of holding the property starts from the date of allotment of the flat.

AS the word 'property' is used in a wide sense and its definition has re-emphasised this by the use of the words "of any kind". Accordingly, a right to obtain conveyance of immovable property is clearly "property". Therefore, if the booking agreement and allotment terms and conditions of the builder gave a right to obtain conveyance on the said flat, the property after fulfilling certain conditions, that itself becomes "an asset" under the Income-tax Act.

To qualify the investment in case of builder flats, the crucial date is the date of allotment of the residential flat and the payment of installment is a follow up action. Allotment is a sufficient compliance for getting the benefits, even if the taxpayer has not paid all installments due under the said scheme. The provisions of the section are a beneficial provision for promoting the construction of residential house. Thus, the date of issue of an allotment letter gives a right to the taxpayer (Intended buyer) to obtain conveyance on the said flat so that it becomes an asset within the purview of the Income-tax Act. The date of acquisition of the said flat shall be the date on which the allotment letter is issued to the intended buyer.

So, the date of allotment should be considered for computation of period of holding an asset.

Here is a link for your reference to case law similar to your case:

http://taxguru.in/income-tax/date-allotment-date-possession-compute-capital-gain.html

Hi,

First of all, if you sell the new Property within 3 years from the date of registration of the new property, then you will lose the benefit of Capital Gain Exemption on Rs. 89L which you had claimed u/s 54 or 54F as the case may be.

The date of Registration of the Property (July 2015) is the date of acquisition of the property for the purpose of Capital Gains calculation on the new property

It will be 3 years from the date of acquisition of the property, which is July 2015. The transfer of property in your name took place in July 2015, thereby giving you the rights of ownership.

Dear Sir,

It is highly recommended that you don't sale the property before three year because if you do so, you will loose the capital gain gain exemption which you claimed earlier while investing in the property.

Further, date of investment in property would be the date of allotment letter from the builder and if no allotment letter is received than date of registration.

But please ensure that when you have made the investment and declare it in return, you have mentioned the same date. Please ensure consistency in both he returns.

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

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Hi,

1) yes, you can sold property post May 2016. and then it will attract long term capital gain.

2) No it does not. if you had taken loan (home loan) then in that case you are required to hold the property for period of 5 years.

in case of claiming of capital gain exemption , you are required to hold the period for period of 3 years. if you sold the property within 3 years time, the cost of acquisition of the property shall be reduced by capital gain exemption amount.

1) You have acquired the property only in July 2015 upon registration, hence, the date of acquisition should be calculated from July 2015 only. In 2013, it was allotted upon payment of Rs 50 L, which, I assume, is not complete payment, as you mentioned that the payments were made from June 2013 to March 2016. The terms of allotment normally stipulate that the allotment will be cancelled if the balance payments are not made.

2) If you have availed exemption u/s 54 / 54F on sale of your ancestral property for investment in this property, you cannot sell for a period of 3 years. If you sell it within 3 years, the cost of acquisition of the new flat will be reduced to the extent of capital gains exemption availed by you.

Hello Goutham,

Yes, you are correct that you could have sold the property in May 2016 and still would not be liable for Short Term Capital Gain.

2. No, ancestral property has no role to play while deciding on the capital gain part.

Trust this clarifies your query.

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

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Dear Sir,

You have to ensure that when you have made the investment and declare it in return, you have mentioned the same date. Please ensure consistency in both he returns.

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

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Dear Sir,

Please find below answers :

- In my opinion the sale of flat would not fall under the Short Term Capital Gain since allotment of the flat was done 3 years before except the word handover you have mentioned/ Was there any documents for handover than date of handover becomes date of possession of flat.