The letter of allotment is sufficient for claiming exemptions under LTCG. Now the letter of allotment is only modified to the extent of change of property in view of the delay in construction of property A. Hence, there cannot be any denial of exemption of LTCG due to change in the property. Nor it can be construed that you sold the property A and in return bought the new property.
Cancellation of Flat: Tax treatment on refund received
Sir, i booked a flat (Say property "A") under CLP using capital gains from another property. Due to much delayed construction and after 5 years from the date of Letter of allotment of the cited property, I requested builder to offer me some other ready to move in property and transfer the monies paid for "A" for the new property. My questions are as follows:-
--- What shall this transaction be treated as, Sale of Property "A" to builder or the refund of money
paid for "A" By builder to me.
---- What shall happen to the capital gains tax saved towards payments for property "A"
regards,
V K SoodAsked 7 years ago in Capital Gains Tax
Hi Sood,
Thank you for writing.
1) This may not be considered as sale of property A and can be treated as refund, provided no builder's agreement and key hand over agreement were executed.
2) As per section 54F, the new property needs to be constructed within 3 years from the date of transfer of original asset . I understand that the house was not fully constructed and delivered until 5 years from the date of allotment ( I am assuming the allotment happened after the date of sale of original asset). In that case the capital gains earlier claimed as exemption would anyway be chargeable to tax. In addition, even if the construction was done and builder's agreement was executed before 3 yrs , the new asset (property A) , if transferred before 3 yrs of construction the Capital Gain earlier claimed as exemption will be chargeable to tax.
Hello SIr,
If the builder did not return you your money but has directly transferred the amount to an already constructed property then the new property is to be your Capital Gain Investment property.
(I am assuming that registration of the under construction property was not done)
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
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