Question regarding transfer of rights on an apartment; whether its LTCG or STCG

Dear Sir,

I bought an apartment in Bangalore during the pre-launch of the project in June 2005. I made the bulk of the payments (~90% of the total cost) for the same based on the payment calendar from June 2005 till June 2008. The rest of the payments were to be made on handover like Electricity/Water/Generator/Carpark/Sinking fund/etc. However, due to the delay in construction the property was completed only after 2012.

I finally took possession paying the last installment & other charges only in May 2014. I had only taken possession of the flat from the builder (handover) but not registered the property as I was planning to sell it as a transfer.

Could you please advice on the tax implications. Since this property was allotted to me in June 2005 and I have made 90% of the payments between 2005 and 2008, and the rest in 2014, does it come under Long Term Capital Gain or Short Term Capital Gain? I read somewhere that the date of allotment and Date of Sale Agreement can be considered as the purchase date? Or is it the date of possession?

I had checked with few chartered accountants but most of them have not dealt with such a situation before. I got this response from an online forum: "Gains shall be Long term for the 90% of the amount, as gains obtained over transfer of rights in a property and not exactly house property." Can I go with this approach? I wanted to know your expert thoughts in this regard.

Kindly advice. Best regards, Sony G

asked Nov 25 '14 at 12:08 by sonyg73 111


If you have not got registration done, it won't be an house property asset and thus you can treat as long term gain on a capital asset.

answered Nov 25 '14 at 13:22 by Pankaj Batra 5.2k320

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Thanks for the advice. So does it mean I do not need to invest the long term gain in another house property (within 3 years) to avoid LTCG tax right and instead treat this as a long term gain on a capital asset?
(Nov 26 '14 at 09:46) sonyg73
You still would have to pay 20% income tax on gains with indexation benefit. In case you want to save tax, you can invest into a residential house property u/s 54F or into capital gain bonds u/s 54EC.
(Nov 26 '14 at 11:46) Pankaj Batra

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Asked: Nov 25 '14 at 12:08

Seen: 2,599 times

Last updated: Nov 26 '14 at 11:46