Best way to minimize Taxation on House sale

mgvsridhar 1
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Hi Pankaj,

My father has decided to demolish the existing building and give it for Development to a builder to construct flats.We(our family) will be entitled to get 5 flats.My father has decided to gift One flat each to me, my brother and my mother, and he would be keeping Two flats in his name.However he wants to dispose off one of the flats immediately(surrender it to the builder) immediately.My question is when will Short term gains be effective.Is it from the date of possession of the flat?.He wants to invest the proceedings in an Infrastructure bonds for the specified lock in period. How will the taxation work out in the above case.Request you to suggest best ways to minimize the Tax burden. Sridhar MGV, Chennai

construction long-term-gains ltcg income-tax
1 Answers

As per my understanding, your father owned the old building and out of 5 new flats built, he is selling one to the builder (towards payment for the construction).

Now it will be considered that your father has sold only flat. If the old building has been owned by your father for more than three years then it will be long term capital gain (only on one flat).

You can compute indexed cost of old building + construction cost and then fifth portion (assuming total five flats are built) is taken as cost price. Only difference of this cost price and consideration value of sale of the 5th flat, will be taken as long term capital gains.

To save income tax on this gain, amount can be deposited into capital gain bonds, or a new house property can be bought from this amount.

Pankaj Batra5212
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