LTCG in case of gradual payment to the builder

Hi,

Have you got the registration done of the property in question.

Hi,

Period of holding will be calculated from the date of allotment of the flat/ agreement to sell the flat.

calculate the capital gain as below

Indexed Cost of Acquisition = (Actual cost of purchase) * (CII Of Year of Sale)/(CII of Year of Purchase).

Indexed Cost of Improvement = (Actual cost of improvement) * (CII Of Year of Sale)/(CII of Year of cost of improvement).

Any Selling Expense like Brokerage Expense

Capital Gain = (Sale Price MINUS (Indexed Cost of Acquisition + Indexed Cost of Improvement + Selling Expense).

in your case index cast of acquisition will be index cast of each installment.

This capital gain you are required to invest under section 54 to avoid paying any taxes on that.

there are three ways in which you can get capital gain exemption

if you planning to purchase another property or have already purchased one year back from the sale of the property then

under section 54:

The exemption under this section is only available to persons that satisfy the following conditions:

An individual or Hindu Undivided Family (HUF) that legally maintains ownership of the house property;

The house property is used only for residential purposes;

The house property is a long term capital asset, and was not transferred or sold within the first three years after the initial date of purchase or construction.

To claim the exemption, one must invest the proceeds derived from the sale of the house property into another residential house either within two years from the date of the sale or one year prior to sale, or one must invest in the construction of a new house within three years of the sale.

The exemption amount will be:

Equal to the amount of the capital gains if the cost of the new house property is greater than the capital gains; or

Equal to the cost of the new house property if the cost is less than the capital gains.

Meanwhile you can park your capital gain (full amount or utilized amount) in CGAS (Capital Gain Account Scheme)

This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.

The deposited money can be used only to buy or construct a residential house within the prescribed time frame.

If you withdraw funds from this account, they have to be used within 60 days.

If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.

The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

You can invest the capital gain amount in bonds under section 54EC:

Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.

These bonds are issued by the Rural Electrification Corporation and the National Highways Authority of India.

The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable.

These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property.

You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).

You can invest a maximum of Rs 50 lakh during a financial year in these bonds as per Budget 2015-16.

kindly also go through the below case law, for your reference, as you have transferred the right of ownership, it may be relevant in your case.

https://indiankanoon.org/doc/597103/

Thanks for the positive feedback.

yes, if there is no capital gain, then you are not liable to pay any taxes on capital loss. and can use sale proceeds as you wish.

There is no statutory liability attached in case of capital loss.

Just make sure your calculations are correct. and you can carry forward capital loss upto 8 assessment years. so make sure you mentioned it in your IT return while filing it.

Dear Sir,

The date of getting allotment letter will be considered as your purchase date and entire purchase consideration.

You have to index your purchase consideration and deduct this indexed purchase cost from sales consideration to arrive at capital gain figure.

You can use below calculator

http://www.bemoneyaware.com/blog/calculators-quiz/capital-gain-calculator/

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

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Hi,

Just ensure that the Capital Gains is calculated properly. If the result of the calculation is a loss, then you need not pay any Tax. You can carry forward this loss up to 8 Years and set it off against any future taxable Long-term Capital Gains you may have in any of the next 8 Years.

I think this query is addressed to other experts specifically.

Hello Sir,

Assuming that your Capital gain working is correct, then you are at your free will to utilize the sale proceeds in whatsoever manner you feel convenient. But as I said just cross check if the calculation is correct.

You can also carry forward your losses for the next 8 years and adjust them against future capital gains if any.

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

It will not be treated as LTCG as the same was not on your name.