Period of Holding of Property purchased under construction

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  1. Vijay1970

    Vijay1970 New Member

    I plan to sell a new flat which I booked (was alloted) in Jan. 2010 in an under construction building in Mumbai. The flat was registered in September the same year (2010). The flat was fully self finananced with me paying a majority of the cost within the 1st three years as & when the builder sent a demand letter against construction slabs. With delays the the possession of the flat was finally given in Feb. 2015.

    I wish to sell this flat & immediately invest the entire proceeds in another property / flat.

    Want to understand if short term or long term Capital gains will be applicable. Also considering various court rulings & CBDT circulars on similar topic ( ruling on Self Financed DDA flat & date of allocation taken as point from where 3 years period for Capital gains considered)...the application of the same in my case. Thanks.
  2. Manoj Mehra

    Manoj Mehra Active Member

    The date on which the flat was allocated to you would be considered as the date of purchase of the flat.

    Therefore, the period of holding would be considered from Jan 2010 i.e. the date of allocation.

    As the property has been held by you for 5 years from 2010 to 2015, therefore it would be considered as a Long Term Capital Gain
    Vijay1970 likes this.
  3. Shishir Nayak

    Shishir Nayak Member

    An asset which is held for 36 months is a long term asset.

    Whether it is held for 36 months?

    Once the right to purchase ( i.e obtain conveyance ) proved to be an asset, it is to be seen when was this right vested in the purchase.

    Hon’ble Andhra Pradesh High Court in the case of M. Syamala Rao v. CIT [1998] 234 ITR 140 held that registration of a document related back to the day on which the agreement of sale was executed, hence, when the builder executed the agreement of sale on 7-8-1993, the assessee was to be deemed to be owner of property from that date and, accordingly, the capital gain was to be worked out.

    In my opinion, the date of allotment is the date when the right of conveyance get vested. So, if there is difference of 36 months in this date and date of sale , then it can be considered that the said asset was a long term asset and gain on sale of such asset was “Long Term Capital Gains.
    Vijay1970 likes this.
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