16 November 2016
I would like to ask one query relating to LTCG on sale of a residential property which is as under:
I booked under construction one residential builder floor for Rs. 17,50,000 on 08.08.2013 and also paid booking/allotment money for Rs. 500,000 on the same date as mentioned in my registry.
Further the construction was completed on 26.05.2015 and I got possession and registry on the same date.
Now I want to sell the above builder floor at Rs. 45,00,000. Further I am interested to buy another ready to move DDA Flat with this whole sale consideration. The profit/gain earned on this builder floor comes to Rs. 27,50,000.
My question is that whether the above profit/gain is Long Term Capital Gain since full 36 months have already been completed from the date of original booking on 08.08.2013 when the construction was started or the same profit is Short Term Capital Gain since the possession was given on 26.05.2015 after completion of the construction work.
I am very much confused whether I should sell my builder floor now or after around 18 months when 36 months will be completed from the date of possession since I want to avoid the tax liability on the full profit which is short term capital gain in nature. In any way I am to buy another ready to move DDA Flat with this whole sale consideration amount.
May I request you to please help me on this issue!
17 November 2016
If I take the allotment/booking date 08.08.2013 with Rs. 500,000 paid on that date as mentioned in my registry. The allotment amount is approx. 28% of the total cost of the apartment. Now I want to purchase another DDA flat with full sale consideration. Can I do this in order to claim LTCG. Since it is a combination of both under construction and ready to move.
17 November 2016
As per above summary which is provided by you, construction will be complete only in FY 2015-16 ie on 26/05/2015. But if as per the agreement/ sale deed with builder, if the land already registered in your name on 08/08/2016 (most of the cases, it will not), then for the purpose calculating Long term asset for land you can take date of acquisition on 08/08/2016 not for Flat. Then the asset you need to treat land is long term & Flat is short term. It is immaterial how much portion of advance you paid for the constructor.Hence it is a short Term capital asset, and you will not get the exemption
17 November 2016
Actually builder has constructed 8 apartments on the same land which were sold to different buyers including me. Further allotment of each apartment was made at the time of booking. The construction was completed in 18 months time after which possession was given to each buyer. The builder completed all the legal approvals from the appropriate authorities before starting the construction. Since the construction of apartments were on the same land starting from under construction to ready to move, however its format were changed from under construction to ready to move completing full 36 months Further the purchase comes into existence when the allotment of apartment is made since contractual relationship as buyer and seller comes into existence. So why we don't take the date of allotment as the acquisition date for the purpose of calculation of LTCG. If we sell any under construction property after 36 months, the we consider it as LTCG. So my question is clear if it is the combination of both under construction and ready to move, why LTCG claim/exemption is denied.
17 November 2016
At the time of allotment of Flat, there is only an agreement to sell the property, not the actual sale of the Flat as the subject matter of sale is not come to existence ie construction is not completed. While selling the flat, capital Asset is Flat, not the under construction property. Also legal tittle for the flat will be received only after completion.
18 November 2016
That's true but why we consider LTCG if we sell an under construction property after 3 years from the date of alltment even though it is an agreement to sell the property.
CAclubindia
