longterm capital gain

I bought a flat from a dlf in 2007 for rs. 50 lacs . Possession of my flat is due in may 2013. If i sell this flat before taking possession for rs. 80 lacs, then will rs. 30 lacs profit be treated as long term capital gain or not. I bought one more flat in december 2012 for rs. 50 lacs. Can this rs 30 lac gain be adjusted against this new flat.

asked Apr 11 '13 at 19:49 by ritesh071 1357


If you sell flat before possession, it won't be counted as residential house property. So for a normal capital asset, it would be considered long term sale as you kept the asset for more than three years.

To save income tax on such gains, either one can invest into residential house property u/s 54F or into capital gain bonds u/s 54EC.

As you already bought another flat in Dec 2012, you can avail tax benefit against this purchase u/s 54F. But you should not be owning more than one residential house properties at the time of sale of DLF flat. Also possession of new flat must be taken within one year before sale or within two years after sale.

To save tax fully, whole sale consideration amount needs to be invested into new property. If less amount is invested, tax would be payable proportionately.

If possession for new flat is not taken before last date of return filing (for the year in which sale happened, 31st July 2014 in case sale happens between 1st April 2013 and 31st March 2014), you would need to invest whole sale consideration amount into capital gain scheme account.

Also one more important point, please see capital gains computation below. Looks like, its not a gain so nothing needs to be done. In fact it would be a capital loss which can be adjusted against any other capital gains or carried forward to next years.

Purchase Year = 2007-08, Purchase Cost = 5000000, Cost Inflation Index (CII) for purchase year = 551
Sale Year = 2013-14, Selling price = 8000000, CII for sale year = 920
Indexed Purchase price = 5000000 x (920/551) = 8348457
Long term capital gain = 8000000 - 8348457 = -348457

CII for 2013-14 has not been declared yet, but has been assumed as 920. It should be around this figure only when declared.

answered Apr 11 '13 at 20:03 by pankaj 4.9k317

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Thanks for your reply. I bought this flat from dlf in 2007. But i am still making payments to them as it is construction linked. I paid them 50 lacs from 2007 to 2013. Last installment is balance which i will pay on possession and then it will be registered in my name. I will sell this property after i get possession. To take benifit will section 54 will apply or 54f. I am confused between these sections as there is no limit of owning number of residential properties under section 54 as told by you earlier. please advice.
(Apr 11 '13 at 20:33) ritesh071
If you sell it after possession, three years term for long term gains would start from possession date. So if you sell it before 2016, it would be short term gains and whole gains would be added to your taxable income and there won't be any section available to save tax. If you want to sell, its advisable to sell before possession.
(Apr 11 '13 at 20:40) pankaj
Thank you so much.
(Apr 11 '13 at 20:50) ritesh071

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Asked: Apr 11 '13 at 19:49

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Last updated: Apr 11 '13 at 20:50