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re development

07 April 2019

Does a tenant or an owner of a flat ( member in chs.)
liable to pay capital gains tax on being allotted to him by the builder an ownership flat on re- development of the building?

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19 Replies

Kutty Dhanush (other) (317 Points)
Replied 07 April 2019

No, unless he sells it.

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Sandeep Ahuja (39 Points)
Replied 07 April 2019

Although some details are unclear to me, i beleive what you are referring to is joint development agreement under which a builder takes ownership of a l/b from the owner and in return gives him some part of the newly constructed building.

JDA are covd in section 45(5A).
the answer to your query is YES.
the assessee has to pay CG tax on building received by him

for purpose of calculating capital gain

Period of holding for indexation of cost of acquisition = date of acquisition to date of transfer of old building
Sale price = fair market value(stamp duty value) of building received from builder.

note that although CG is taxable in year of transfer, as per 45(5A) you have to pay CG tax only in the year in which you receive the new building from builder.

Kutty Dhanush (other) (317 Points)
Replied 07 April 2019

Mr. Suddep Ahuja is correct, but missed the exemption available u/s. 54 when the tenant or owner receives the house property back.

Harshit Baheti (344 Points)
Replied 07 April 2019

Agreed to mr sandeep ahuja
But tax chargeable in year in which certificate of completion for whole or part is received and not in the yr of receiving new blding from builder

suneet moholkar (25 Points)
Replied 07 April 2019

According to me, when an existing tenant or owner/ member of a flat gives his irrevocable consent for re development of the building in which his flat is situated and thereafter, when that building is re- developed by builder along with owner of the building or along with the society ( if society is owner of the building) and then, when that person is allotted new ownwership flat of bigger area in lieu of his existing flat as per terms of agreement , he is not liable to pay capital gains tax as transaction is not a transfer u/s 2(47) of I T Act.

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Sandeep Ahuja (39 Points)
Replied 07 April 2019

yes i agree to that exemption may be available and tax chargeable when certificate of completion received.

suneet moholkar (25 Points)
Replied 07 April 2019

My basic point is whether the transaction is a "transfer"? Question of exemption u/s 54 will arise only when there is a capital gain arising out of a transfer . In the case under dicussion there is no transfer at all ..

Sandeep Ahuja (39 Points)
Replied 07 April 2019

@ suneet, yes there is a transfer as per section 45(5A) and you are liable to pay capital gain tax u/s 45.

suneet moholkar (25 Points)
Replied 07 April 2019

What I am asking is capi tal gains in the hands of that individual tenant or owner of Flat AND I AM NOT TALKING ABOUT CAPITAL GAINS IN IN THE HANDS OF DEVELOPER/ OWNER OF BUILDING

suneet moholkar (25 Points)
Replied 07 April 2019

What I am asking is capi tal gains in the hands of that individual tenant or owner of Flat AND I AM NOT TALKING ABOUT CAPITAL GAINS IN IN THE HANDS OF DEVELOPER/ OWNER OF BUILDING

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suneet moholkar (25 Points)
Replied 07 April 2019

What I am asking is capi tal gains in the hands of that individual tenant or owner of Flat AND I AM NOT TALKING ABOUT CAPITAL GAINS IN IN THE HANDS OF DEVELOPER/ OWNER OF BUILDING

Sandeep Ahuja (39 Points)
Replied 07 April 2019

yes sir capital gain is chargeable in the hands of owner of building. why ? because in very simple words he has TRANSFERRED HIS OLD BUILDING and HE GOT A NEW HOUSE FROM BUILDER. U/s 45(5A).

feel free to ask further. give a thumbs up if your query is resolved now.

suneet moholkar (25 Points)
Replied 07 April 2019

I am a tenant/ owner of a flat in building, which is getting re-developed. After re-development I get ownership flat of bigger area. Am i liable to pay cg when i get new bigger glat-- that is what I have been asking. It appears you have not understood my query. I am sorry to say but it appears you lack clarity and understanding of law on this topic

Sandeep Ahuja (39 Points)
Replied 07 April 2019

yeah i lacked clarity, thats why 2 experts above agreed to my answer. great way of replying to someone who is trying to find an answer to your query. you dont like the answer, its fine ignore it, but atleast dont comment something which hurts the other person.

and now again detailed answer to your query

if you are a tenant why will you pay CG tax, the landlord shall pay tax if any.

if you are the owner/landlord if such house which gets redeveloped
THEN. YES SIR YES CG WILL BE CHARGED. you dont trust me thats fine go and read the law,

2(47)(v) transfer includes giving possession of immovable property for part performance of contract of the nature referred to in 53A of transfer of propert act

in your case the said transanction of handing over of prop to developer for redevelopment is covered here.

if there is a REGISTERED AGREEMENT provisions of 45(5A) are attracted and you are liable to cap gain tax as already explained.

over and out no further discussion from my side. answering one last time just for those last few lines of appreciation you wrote. you can consult an expert who has the level you require.