LTCG exemption (property bought 18 months ago)

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    TARANG GURU New Member

    I have bought a new property before 18 months of sale old one, but builder failed to give it on time I.e. 12 months (this made me delay to sell my old property). Am I liable to pay long term capital gain tax?
  2. ZED

    ZED Well-Known Member

    Kindly provide us more details to accurately answer your query.
    Please also mention the dates of the agreement and when was the property purchased, type of property etc.

    TARANG GURU New Member

    I made deal with a builder on Nov '10 for buying a bungalow in ahmedabad and made payment as following:-
    03/11/10 Rs 20,00,000/-
    02/02/11 Rs 10,00,000/-
    21/12/12 Rs 25,00,000/-
    13/06/13 Rs 11,00,000/-
    31/10/13 Rs 30,00,000/-
    23/02/16 Rs 47,500/-
    20/05/16 Rs 30,00,000/-
    20/05/16 Rs 12,72,600/-

    Sale deed of LAND which was amounting to Rs 30,00,000/- was done on Nov '13 and building construction deed was made on 22/5/16, I am still to get possession letter. We got BU permission on 04/5/15. This delay is caused due to govt rules and regulation changed after plan pass.(later on it was transferred to AMC from AUDA etc)

    I sold house on 24/4/16 @ Rs 97,50,000/-, Indexed Cost of Acquisition is Rs 20,00,000/-. Paid brokerage of Rs 2,35,000/-

    Will I have to pay LTCG tax or not if yes then how much or is it better to invest in 6% bonds?
  4. ZED

    ZED Well-Known Member

    As per the judgement in Kishore H. Galaiyavs ITO [2012] 24 11 (Mum.) , booking a flat (which is to be constructed) tantamounts to construction for the purpose of S.54/ 54F.

    Note:Judgement in case of CITv. HK Kapoor 150 CTR 128 (All) (1998) would not be applicable in this particular case because the facts of the case are different.

    Exemption u/s 54 is available if assessee purchased within a period of one year before or two year after the date of transfer
    Within a period of three years constructed one residential house in India

    As you can see, for construction exemption is available if the investment is made Within a period of three years from date of transfer. It does not covers the period prior to the date of transfer. Hence in your case, You won't be able to claim exemption for that house. But you can if you intend to purchase/ construct another new residential house in India.

    Kindly do refer to the extracts from bare Act for clarity.

    54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India],

    LTCG would be of 75.15 Lakhs
    You have option to claim exemption u/s 54 (as explained above)
    Bonds u/s 54EC are also a very good method of tax saving. Don't see it as mere 6%, see it as 20% of tax saved + (12% surcharge on 20% if any) and 3% cess on 20% .
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