We (me and my wife) have a flat in Bangalore. Both of us are working. We have done the sale agreement in Nov 2011 and Registration and possession of the flat in 2013 April. I have bought this property for 60 lakhs with a loan of 44.5 Lakhs, so far I have paid around 23Laks as interest and 12 lacks towards principle. Now we are going to sell this property. The sale agreement has two parts one for property (70 Lakhs) and another Fixtures and fittings (15 Lakhs) Would like to know the Tax implications of the sale. 1) What will be tax implication of this deal 2) Buyer has told me that for Fixtures and fittings (15 lacks) , there will not be any tax. Is this correct?. If no what will be the tax 3) What will be the tax implication of remaining (70 Lacks)
1. It would be a long term capital gain.
2. The buyer is correct, provided there is a separate agreement for furniture and fixtures and the same are not used for any business purposes.
3. Capital gain arising out of the sale shall be taxable @20%. For calculating indexed code of acquisition, date of allotment has to be considered.
If you look at the interest I have paid (23 Lakhs) , I have gained only 2 lakhs. Do I need to pay only tax for this amount ?
Interest paid has no effect on cost of acquisition for capital gain.
You would have already claimed interest expense u/s 24.
What was the date of allotment? Accordingly we will let you know whether capital gain is arising or not because it may happen that the indexed COA covers the sale consideration.
Dates Sale Deed - Nov 2016 Registration - Mar-2016 Possession - Apr-2013
Sorry dates are corrected. please ignore the previous dates Sale Deed - Nov 2011 Registration - Mar-2013 Possession - Apr-2013
There is capital loss in this case. Hence no need to pay taxes.
You can carry forward the capital losses.
I assume that the original cost of 60 lakhs doesnt include the costs of furniture and fixtures.
Hi,
I am assuming that :
1. you have a separate consideration agreed for furniture and fixtures in the agreement.
2. Cost of furnitures and fixtures is not included in the COA of acquisition.
If the above assumptions are correct, you will have a capital loss and no need to pay any capital gain taxes.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hello.
On the basis of the information provided by you, if you consider the interest cost as a cost of acquisition then no long term capital gain tax will be paid on your part. But it is subject to litigation and you should be prepared for it since the Assessing Officer may not accept your point of claiming Interest Cost as Cost of Acquisition.
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
Hi,
Whilst your wife and you were paying the EMI, have you claimed a deduction of the interest and principal amounts, in your tax returns? If you have, then the amount claimed as deduction will be taxable in case the sale occurs within 5 years from the end of the financial year in which you receive possession of the property.
Coming to your question on capital gains, if you want to claim interest on load as a part of cost of acquisition, then you will have to be prepared to defend your case at the time of assessment. Otherwise, the indexed cost of acquisition will be indexed amount of Rs. 60 lakhs. Assuming you paid the entire amount in November 2011, there will be capital loss of Rs. 18.69 lakhs and you need not worry about paying any capital gains tax.
The sale of furniture will be treated as capital receipt and is hence not taxable.
Trust this clarifies.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
