Capital gains on sale of flat - date for calculation

akand 1
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My father purchased a flat in distant Mumbai suburbs. He made the agreement on 17/8/1994 and first payments commenced in 1994 to the builder. However, due to problems, the builder could not proceed with that building and therefore in 1997, he transferred (with my fathers agreement) all the monies paid so far to another project of his. There was a fresh agreement dated 22/7/1997 for this with my father and mother as joint owners. But even this project got delayed and possession was finally received on 11/1/2006.

Now my mother passed away in Dec 2013. My father who is now 82 years old wants to sell this flat to fund his old age expenses.

To calculate capital gains tax indexation benefit what date must be taken as the starting point? Is it the 1994 date (original agreement) or the 1997 date (fresh agreement) or the 2006 date (possession date)?

capital-gains-tax aquisition-date section-54
1 Answers

Generally its the possession date which is used for computing capital gains, which is accepted by IT department.

However in some cases, where some assessee have fought court cases (where bulk of the amount was paid around agreement and possession was delayed which was not in their control) have won.

Pankaj Batra5212

Thanx Pankaj for the quick reply.

Two follow up issues: 1. Since there is almost a 10 year delay between fresh agreement(1997) and date of possession(2006), can we not take the fresh agreement date as purchase date? 2. In the event that possession date is taken, capital gains of almost 19 lakhs will arise. Can he invest in section 54 bonds to save tax. My father has another flat where he stays.

Thanx and regards,

Akand

akand•

If most of the payments had already been made around 97-98, you should consider that for computation of gain.

If not, then you should only choose possession date.

Yes, capital gains can be invested into capital gain bonds to save tax u/s 54EC.

Pankaj Batra•
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