Capital Gains Tax


I have property in Pune that I want to develop. I am planning on going into a joint venture with a builder. My question is, that once the building is constructed and I have some flats under my name, will I have to pay capital gains tax of 30% if i decide to sell some of the apartments within one year of completion of the development? I plan to invest the money from the sale of the apartment into property in Mumbai. Please advise.

asked Feb 28 '11 at 15:41 by sunera55 1111

If you are going for joint venture with builder, different rules will apply.

Lets say builder will be retaining half of the flats, say n, after handing over rest of the flats to you. Effectively, you are transferring 50 per cent of undivided share in the land to the builder as a consideration for rest of flats which he will be constructing for you. We have to compute capital gains in respect of transfer of 50 per cent undivided share of land. The sale consideration to be adopted would be cost of construction incurred by the builder for completing all the flats to be handed over to you. For example, if the cost of construction of each flat is Rs.20 Lakhs, the total sale consideration would be Rs.20n lakhs. From this you are entitled to deduct indexed cost of acquisition of land, to compute capital gains on this piece.

For the rest of the flats, if you sell after one year, again it will be long term gain on these and income tax can be saved by investing further into a property.

So, in total, you will have to compute capital gains twice, first when you get initial flats from builder for selling some percent of your property. Then once you sell your flats, again capital gains will arise. For both of these gains, either you will have to pay income tax or invest the gains into another property or into capital gains bonds.

answered Mar 01 '11 at 11:48 by pankaj 5.2k320


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Asked: Feb 28 '11 at 15:41

Seen: 2,344 times

Last updated: Mar 01 '11 at 11:48