Date of Agreement or Registration for Capital Gains

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  1. samr9999

    samr9999 New Member

    I have booked an under construction residential flat for rs. 35 lakh in november 2013. i have paid 7 lakh (20%) at the time of agreement in november 2013 to the builder. For balance 28 lakh i have taken loan from bank. For availing loan from SBI, the registration of under construction flat has been done in November 2013. the original registration papers have been retained by the bank. Disbursement are made by the bank linked to the stage of construction. Till June 2014, bank has made payment of Rs. 21 lakh to the builder. Thus total of Rs. 28 lakh has been paid to the builder by June 2014. The builder proposes to hand over the possession in March 2015 ( latest by june 2015 as there may be a delay of 2-3 months). The remaining 7 lakh is to be paid by bank before taking possession in march/June 2015.

    Due to some financial crisis i wish to sale a residential plot which i had purchased in 2001. The cost of purchase was Rs` 5 lakh. The sale is likely to fetch about 20 lakh. The government rate i.e. the value at which the stamp duty for sale of land will be calculated is expected to be around 25 lakh. (My sale rate will be slightly lower than the govt rate) However, it may take about six months for sale to mature as i will have to look for a good buyer.

    a) What will be the capital gain on sale of my residential plot, rs. 15 lakh or rs. 20 lakh?
    b) Can the amount of 7 lakh paid by me in Nov 2013 be adjusted to offset the capital gain?
    c) Will payment of loan already disbursed by the bank (Rs. 21 lakh) eligible for exemption of long term capital gain?
    d) Will my purchase of under construction flat (registration of under construction flat in November 2013, possession of ready to move in March/June 2015) fall within the permissible time period for availing exemption from long term capital gain tax ? Which date will be considered for calculating the time period for availing exemption of LT capital gain tax - November 2013 or date of possession?
  2. Karan Batra

    Karan Batra Well-Known Member

    Dear @samr9999

    a. The Sale price of your flat would be considered as 25 Lakhs. The purchase price of your flat would be indexed and your Indexed Cost of Acquisition would be approx Rs. 12 Lakhs and therefore your Long Term Capital Gains would be approx 12 Lakhs. Kindly refer this article for Indexing the Cost of Acquisition -

    b. Yes, the amount paid by you for purchasing the residential flat can be offset against capital gains on sale of residential flat bcoz even if the flat is purchased 1 year before - exemption under Section 54 is allowed. Kindly refer:

    c. The amount paid by the Bank would also be eligible to be claimed as an exemption.

    d. Different professionals have different views regarding the date to be considered and there is still confusion. However, most professionals that the date of agreement will be considered as the date of purchase as it gave you a right in the flat on the date of agreement itself.
  3. samr9999

    samr9999 New Member

    Thanks sir for your reply. The issue related to the value of LTCG is clear now. However, the issue of time period for availing LTCG benefit stills remains unclear. If date of agreement will be considered as the date of purchase of flat, will the date of agreement to sell the land considered as date of sale of land? Or the date of registration of sale of land will be considered as date of sale? There may be a gap of 3 to 4 months between the date of agreement and date of registration as certain formalities are required in case of my plot.
    My a) agreement for purchase of flat was in Oct'2013,
    b) the under construction flat was registered in Nov'2013 (I wanted to do the regn after the possession/ complete construction, but SBI people insisted for regn of under construction flat and have kept the original regn. papers). It is clearly mentioned in the regn papers that the flat is under construction and my agreement with builder indicating the payment schedule linked to stage of construction has been enclosed as annexure.
    c) Construction of my flat is likely to be completed in March 2015 and possession will be handed over during March'2015.
    d) I can do agreement for sale of land in the month of Aug/Sept 2014 and take some nominal amount, but final regn and full payment may be possible in Nov/Dec 2014.

    Pl help and clarify. If i sell the land and do not get the benefit of LTCG i will suffer huge loss.
  4. Karan Batra

    Karan Batra Well-Known Member

    1. Date of Agreement is only to be considered in case of under-construction flats where the Flat Registration is not done but the flat has been allotted.

    In cases where the Flat Registration is done, the date of Registration would be considered. In your case, as your registration has been done - the date of registration would be considered.

    2. The point for Date of Agreement only holds true for under-construction flats where registration is not done. So for the flat which you are selling - date of registration would be considered.

    You can go ahead and sell your flat without worrying much about the Capital Gains Exemption as yours is a genuine case and therefore the Exemption would be allowed.

    Happy Investing :)
    John777 likes this.
  5. John777

    John777 New Member

    Hi Karan,
    My mother sold my grandmother's apartment which she partly inherited from her in September 2014 & re-invested the amount in November 2014 (within 2 months) in an under-construction apartment in Bangalore. However, a construction/agreement to sell was signed at that time between her & the builder. Is it that the Sale Deed must be registered with the Sub-Registrar before the end of 2 years for sale to avoid capital gains tax ? Or can she just do a registered notary on the agreement without having to register the Sale Deed as the project is incomplete & she would be at the mercy of the builder after she registers...

  6. pkjindal

    pkjindal New Member

  7. pkjindal

    pkjindal New Member

    Hi Karan,

    I bought an under construction flat in 2006 in about 37 Lakhs. All white deal and got a loan from HDFC of Rs 33 Lakhs as well duly paid to the seller who made profits on the underlying purchase price of Rs24 Lakhs.
    Since it was a transfer within the builder's records, the builder got registration executed in Feb 2007 for all the buyers incuding me at the consideration of Rs 24 Lakhs.
    I paid a stamp duty of about Rs 2.11 Lakh.

    1. Now if I sell my house, what price will the LTCG be considered on? Registration price (Rs 24 Lakh) or the Actual Purchase price (Rs 37 Lakh) on which loan was disbursed and which I am still paying and claiming tax benefits on !
    2. What kind of documents/records are needed on home improvement. I got major repairs done in the last 10 years.
    3. Can I consider home loan interest in the total cost of acquisition of the flat for me?

    Will appreciate a quick help.

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