LTCG on sale of property

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  1. Ramachandran Iyer

    Ramachandran Iyer New Member


    My mother-in law who is a senior citizen is selling her house and has an LTCG of 18 lakhs post indexation. The sale would conclude by July 2016. We had some queries:

    1. She had purchased another property in Feb 2015 and received possession in Feb 2016, wanted to know if she would be eligible for LTCG exemption...would the date of booking or date of possession considered here? The query is in reference to 1 year before and 2 years later period given to invest in another property to claim tax exemption.
    2. If date of booking is considered, then exemption is not possible. We would then plan to invest in CG bonds like NHAI or REC within six months of sale.
    3. For calculation of LTCG, would be following be allowed to be considered, under heading: "Exemption incurred wholly and exclusively in connection with such Transfer/sale"?
    a. Stamp Duty, Registration charges incurred during purchase of the old property.
    b. Interest and principal paid toward the loan taken to purchase the old property.
    4. For items considered for calculating Indexed cost of Improvement like renovation etc. - would an bill showing the expenses be required...since it is likely to be not available for old property.

    Please advice.
  2. Parul_Gupta

    Parul_Gupta Active Member

    1. The date of booking would be considered as the date of purchase
    2. Yes, you can invest in NHAI/REC Bonds
    3. Yes, you can claim these expenses if not claimed earlier
    4. Yes, you should have all bills for the expenses which are being claimed.
    Ramachandran Iyer likes this.
  3. ZED

    ZED Well-Known Member

    The main issue in this case is that if we consider that the property has been purchased in Feb 2015, then it falls beyond 1 year but if we take the date of possession then its within 1 year.

    There are many dispute in such cases , though usually we would see date of possession but at times date of agreement is also considered. This ofcourse is dependant upon facts of the case.

    In my personal opinion, you should be eligible for claiming the property because the date of possession is within 1 year period.
    I can bet 95% on allowability and for 5% uncertainty due to the disputes. The best thing would be to check to which jurisdiction you fall and what is the judgment which is prevailing in your jurisdiction.

    Date of booking should as such not be considered , at most allotment letter or agreement to sale can be considered.
    But due the litigations I will advice to opt 54EC [bonds] unless you are willing to go in appeals. I am 95% sure that you will get exemption.

    They shall constitute cost of acquisition and indexation will be applicable.
    Provided that the deduction has not been claimed in respect of this in some other provision. [I know that there are some judgement wherein double benefit has been allowed but it is absolutely against the intention and the structure. I will not even say that you have 1% chance in getting both the benefits.]

    It is possible to claim them as cost of acquisition provided the benefit of deduction u/s 24 and u/s 80C has not been claimed.

    It is must.
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  4. Ramachandran Iyer

    Ramachandran Iyer New Member

    Thanks for the inputs Parul and ZED, it does clarify many important points.

    Just to clarify:
    1. The agreement was done in Feb 2015, final payment and possession in Feb 2016.
    2. St. Duty, Registration, Interest and Principal were not claimed under other IT sections, so we would plan to consider this while calculating LTCG.

    1 additional query I had: If the subscription to the CG Bonds (NHAI/REC) are not Open during the period July to Dec 2016 (the stipulated time to park the LTCG), what step we should be taking?
  5. For your first query: she would not be eligible for the LTCG exemption as date of purchase is to be considered. Refer Punjab and Haryana High Court in the case of Vinod Kumar Jain v CIT and Others 344 ITR 501

    For your third query: ( Exemption incurred wholly and exclusively in connection with such transfer/sale)
    a. stamp duty, registration charges incurred during purchase of the old property - will be available under sec.80C
    b. Interest and principal paid towards the loan taken to purchase the old property- will be available in sec.24 for interest and sec 80C for principal.

    In calculation of LTCG it will not be considered. You can take stamp duty and registration charges during the sale of asset for the deduction under "Exemption incurred wholly and exclusively in connection with such transfer/sale".
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  6. Ramachandran Iyer

    Ramachandran Iyer New Member

    I believe we would not be able to claim (Loan Interest and principal) deductions under 80C and sec 24 NOW, since the property is being sold.

    We are not paying stamp duty and registration charges for the sale of is borne by the purchaser. The query was if we could consider those expenses which were already incurred while purchasing the property years back, but were not claimed under section 80c and 24.
  7. ZED

    ZED Well-Known Member

    Yes, they will form your cost of acquisition.

    Please note that judgement are sometimes specific and are dependent upon facts of the case and the issue before the court. I have spent around 1 year in studying various judgements which deals with the date of acquisition and date of sale in respect of exemption. Its best to be prudent unless one is willing to go in appeals. Try to avoid taking exemption in respect of the above property (though I believe it will be available to you).
  8. ZED

    ZED Well-Known Member

    The issue is open on-Tap Basis and will close on March 31, 2017 [for F.Y16-17] at the close of the banking hours or on achieving of ceiling limit of Rs.5,000 Crore without any further notice or at a date as may be decided by NHAI at its absolute discretion.
    Keep in touch with the notifications.

    If you fail to claim this then you can try purchasing a new house within the stipulated period and claim exemption u/s 54.
    Ramachandran Iyer likes this.
  9. Ramachandran Iyer

    Ramachandran Iyer New Member

    Thanks ZED for sharing your thoughts.
    ZED likes this.
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