Capital gain tax clarification

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Rohit

TAXPAYER

31 Points Joined June 2016

I have sold a property in 2011 and there was a capital gain of 15 lacs which I have claimed during that year.In July 2011 I have opened the capital gain account and deposited the money into that account.I have bought an apartment in July 2012 in resale from a person in installment plan who booked the same with the builder in August 2011(allotment letter). I have closed the account in 2013 for paying one installment to the builder.As per the builder buyer agreement he was suppose to give possession in 2015 which is not given till today.It has been more than 3 1/2 years, I am holding this property and possession is expected in august or september '16.I want to know the tax implications if I sell the property before taking the possession? Is it compulsory to take the possession in this case? what are the tax implication towards my capital gain ? Will the duration counted when the money was parked in the capital gains account(1/1/2 year) ?

Replies (4)

CA Harshal Totla

Chartered Accountant

2229 Points Joined May 2014

Dear Rohit pls go through below link for clearance of your doubts, if you still have any pls let me know
https://www.charteredclub.com/section-54/

Rohit

TAXPAYER

31 Points Joined June 2016

I have already gone through it...But unable to find that the capital gain invested property needs to be hold till possession or for 3 years only...I have researched on the net and got information that it is not necessary to get the possession within 3 years in under construction property...but can we sell it after 3 years without taking the possession and there will be no problem from assessing officer....in terms of capital ain invested in this property....

CA Harshal Totla

Chartered Accountant

2229 Points Joined May 2014

As per section 54" If the new property is sold within a period of 3 years 'from the date of its acquisition', then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain. pls note that it uses the words 3 years from the date of acquisition, here the date of acquisition will be counted from the date you have acquired it from previous buyer. So the conclusion is you need not wait till possession is given to you as per my view.
Please correct me my expert friends on this forum if i am wrong

Rohit

TAXPAYER

31 Points Joined June 2016

Thanx for the prompt replyThe thing is 3 years are already over when I have bought the new property.I have bought it in 2012 and its june 2016..So, 4 years will be completed by next month..And it's no where mentioned that the possession is necessary for claiming capital gain tax...Following are the links or details I have got from my research:-

As observed by the Hon'ble Tribunal in the case of Mrs. Seetha Subramanian vs. Asstt. CIT [(1996) 59 ITD 94 (Mad)], in order to get the benefit under s. 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establishes that the ITA No.634/Bang/2010 assessee had invested the entire net consideration within the stipulated period. This finding of the Hon'ble Tribunal got the seal of approval from the Hon'ble Madras High Court in the case of Sardarmal Kothari referred above.

https://www.psheth.com/deduction-us-54-54f-allowed-if-delivery-of-house-could-not-be-obtained-but-entire-payment-is-made-del-itat/

https://www.taxalertindia.com/2012/08/section-54-exemption-is-to-construction.H T M L#axzz4BLiFcuwM

Pls confirm If I can sell it without taking the possession and capital gain tax will not be reversed in my case.