Selling of under construction flat

Tax queries 687 views 7 replies

alokedeep

Product Head

29 Points Joined March 2013

Need advice on a property transaction that I did recently:

I sold off in April,2014 my un-construction flat that I had bought in June,2010.

Purchase of this flat was funded by Home Loan on a Construction Linked plan and I also paid service tax to builder as flat was under-construction. As the loan was only partially disbursed, the Bank did an internal transfer of loan in their books to new buyer and balance including my initial investment and profit was paid to me.

My questions:
--Would any sort of capital gains apply on above transaction? As it was un-construction house, I have not claimed any rebate under IT and only paid Pre-EMI interest on Bank Loan
--Can I utilize portion of amount that I have received including my initial investment to pay off portion of my other home loan(property purchased in Sep,2012)?
---Make an initial payment towards purchase of new house(uptil what period)?

Replies (7)

Mihir

Wealth Manager

5293 Points Joined December 2008

There will be long term capital gain on the sale of this property. You cannot claim exemption by pay off other home loan.

alokedeep

Product Head

29 Points Joined March 2013

Thanks Mihir, can you advise if I can invest a portion(my initial investment) of my gains into paying off other home loan

Income Tax Wala: (Fin. Expert)

Chartered Accountants

2015 Points Joined August 2010

Dear Alokedeep

1. there will be a long term capital gain

2. can can use the consideration amount to pay other home loans but you will not get any exemption for the same.

3. however you can use LONG TERM CAPITAL GAIN PORTION to buy another residential house and rules is as under

* purchase 1 year before or 2 year after date of transfer

* construct with in 3 year after date of transfer.

Guest

You can claim exemption by investment of indexed capital gains into REC bonds(54EC)/ new house(54)

PRITAM JAIN, CA , CS

Practising CA CS

398 Points Joined September 2007

First of all i would like to thank Mr. Alokdeep to put forward very challanging case in fron of us.

Even i am confused a bit and i would like my seniors and experts to help me out to resolve following queries of mine pertaining to this case.

1) when a property can be called as a "Residential House Proprty"(RHP)?

a) A Property meant and agreed to be constructed for residence is a RHP or

b) A property after a certain stage of completetion can be called as RHP?

2) a) If asset transferred is RHP then he can claim exemtion under sec. 54 by invesing in new RHP

b) If it is not RHP(transfer other assets other than RHP) then can he claim exemtion under sec. 54F by investing in a RHP(provided he is not having any RHP on the date of transfer)

So i feel in any situation assessee can claim exemption either u/s. 54 or 54 F by investing in new RHP

Regards

Guest

I agree with Pritam. A better step would be to invest u/s 54F(Net sale consideration) [instead of 54 ]or 54EC( capital gains)

alokedeep

Product Head

29 Points Joined March 2013

Dear Mihir,

One more advice that I see. The under-construction house that I bought was funded by Home Loan on Construction Linked Plan. Hence while I bought house in June,2010 and sold in Apri,2014(which qualifies for Long term capital gains), the payment was made in a staggered way on reaching each stage of construction between June,2010 until Nov,2013-

Hence does it still qualify for Long term capital gains(The builder-buyer agreement was done in June,2010)