Section 54 of the it act

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2014 Post the changes in Section 54 in the recent budget, I have the following query :

I own a flat in a housing Society which has over 200 members. The Society is under redevelopment by one of the top 5 Developers in Mumbai. As per the terms of the Development Agreement each member shall get double the area that he currently owns post redevelopment. Hence I am eligible for 2 independent residential units in the redeveloped Society in lieu of one. These 2 units may be on different floors.

Will there be any tax incidence on the allotment of these 2 units?

If yes how will the same be calculated?

Can someone pls revert.

Ashwin Sharma

Ashwin Sharma (Expert)
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22 August 2014 Your cost of construction of two new independent flats will be your sale consideration. Kindly ask the developer to mention cost of construction (per sq ft) in development agreement.

Arrive at the indexed cost of acquisition of old flat.

Then arrive at long term capital gains.

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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22 August 2014 i believe the problem you are facing is whether or not you get exemption given that both flats are on separate floors. Given the change in section 54, you get exemption for both houses. Only the cost of one house can be claimed as exemption under section 54. the cost of second flat will be taxable gains against which you may get exemption if you invest under section 54EC

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Querist : Anonymous

Querist : Anonymous (Querist)

09 September 2014 Dear Mr Nikhil Kaushik,

Thanks for your revert. So what I understand from you reply above is as follows :
If on redevelopment, if I get 2 flats say RD1 (ie redeveloped flat 1) & RD2, then for one flat (say RD1) I can take benefit of "indexed cost of acquisition of old flat" whereas for the second flat (RD2) the COA will be considered as ZERO.

Is my above understanding correct?

If yes, at what stage do Capital Gains arise? Is it at the
a) time of allotment of 2 flats in lieu of 1 OR
b) Is it at the time of registration of the Redeveloped flats OR
c) Is it at the time of Sale od the Redeveloped Property (RD2 in the above example)

Revert on the above would be extremely helpful.

Rgds