Capital gain calculation (sale of house) & sec 54 exemption

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2017 Quick question.. seek advise from Income Tax experts knowing about Capital Gains from Sale of Residential Property..

Residential property 1:

Application/Allotment Date: April 2009
Registration Date: 16 November 2009
Possession Date: 25 December 2011

Total Cost: INR 50 lakhs

Likely Sale Consideration (Net): 1.7 crores (Sale Date: July or August 2017)

Residential property 2:

Application Date: 16 Nov 2013
Allotment Date: 17 Jan 2014
Registration Date: 2 May 2014
Possession Date: July/August 2017

Total Cost: INR 43 lakhs

Question: What would the long term capital gain here on property 1? When should the sale agreement of property 1 be made so that exemption u/s 54 can be taken on property 2?

Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2017 For purchase : 1 year before or 2 years after the date of transfer......
so to say, the date of transfer of property 1 should be within one year from july/august 2017..

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2017 Thanks Amol Ji.

So does that mean date of possession would be considered as the date of purchase in both the cases?

Also note both were booked while construction was yet to start and there was a lock-in/restriction for transfer or sale until possession..

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Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2017 there are many case laws on this issue which are contradictory in nature...
If date of possession is considered to be the decisive date of transfer, then the above calculation holds good.
In your case, since it is a purchase through BOOKING, the crucial question that might arise is whether to consider only that portion of payment which falls within 1 year before the sale of property 1.

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2017 Thanks.

Possible to share those case law details?

Thanks again.

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2017 Which year would be used for indexation for property 1?

If full amount is paid for property 2 till 30 June but possession letter has not yet received. If possession letter comes after date of sale agreement of property 2, can exemption be claimed under section 54 as construction is completed within 3 years of date of transfer?

Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2017 yours is a case of Purchase and not Construction.
Construction means you are constructing by yourself or through contractor.