LTCG on sale of residential flat

I bought a residential flat in the financial year 2006-07; as per the following purchase details:

1) I have signed the Agreement of Sale with the Builder on May 22, 2006 for total sale consideration of Rs. 11,00,000/- (Rupees eleven lakh only). I have paid Rs. 1,00,000/- (Rupees one lakh only) as an advance by way of Cash, at the time of signing this agreement of sale. This Agreement of Sale was not registered with the appropriate authorities.

2) Subsequently, the flat was registered in my name, as a SEMI-FINISHED FLAT, on August 17, 2006. Since it was a semi-finished flat, the flat was registered for a total sale consideration of only Rs. 5,97,000/- (Rupees five lakh ninety seven thousand only). Towards stamp duty and registration charges, I have paid Rs. 45,735/- (Rupees forty five thousand seven hundred and thirty five only).

3) For buying this flat, I have taken a Home Loan of Rs. 8,80,000/- (Rupees eight lakh eighty thousand only) from the Syndicate Bank. With my consensus, at the time of registering the flat in my name on August 17, 2006, the bank had paid a part of the total home loan, i.e., Rs. 5,97,000/- (the sale consideration of the semi-finished flat as per the registered sale deed, dated August 17, 2006), by way of Demand Draft, dated August 17, 2006).

4) Subsequently, as per the improvement costs incurred by the builder in completing the construction of the Flat, the lending Syndicate Bank paid remaining amount of Rs. 2,83,000 (Rupees two lakh eighty three thousand); and I have paid a total amount of Rs. 2,20,000/- (Rupees two lakh twenty thousand; including Rs. 1,00,000/- paid as advance while signing the Agreement of Sale on May 22, 2006), from my own sources. So a gross total of Rs. 11,00,000/- was paid to the builder as per the Agreement of Sale by the time I had taken possession of the Flat in October 2007. However, I do not have any proofs of payment made to the builder, neither cash receipts from the builder nor the details of my bank payments.

Now, in this current financial year (2018-19), I have sold the above mentioned property for a total sale consideration of Rs. 43,00,000/ (Rupees forty three lakh only) on July 11, 2018, and I have registered the property in the name of the Vendee for Rs. 43,00,000/-. I have received the entire sale consideration from the Vendee in following modes:

1) Rs. 3,00,000/- (Rupees three lakh only) as advance on June 14, 2018, by bank transfer to my savings account.

2) Rs. 10,00,000/- (Rupees ten lakh only) as second installment on July 11, 2018, by bank transfer to my savings account.

3) Rs. 30,00,000/- (Rupees thirty lakh only) as the full and final payment on July 11, 2018, by way of DD from the Axis Bank (The Vendee has availed a home loan of Rs. 30,00,000/- from the Axis Bank).

NOW I HAVE FOLLOWING QUESTIONS:

1) Can I consider the total sale consideration of Rs. 11,00,000/- as per the agreement of sale, I had signed with the builder? plus the stamp duty and registration costs of Rs. 45,735/- as Costs of my Acquisition of the flat, though I do not have receipts from the builder for Rs. 2,20,000/- I have paid directly to the builder from my own resources?

2) Should I consider only the Sale Deed value of Rs. 5,97,000/- plus stamp duty and registration costs of 45,735/- as Costs of my Acquisition of the flat? Since this sale deed was registered for a semi-finished flat, can the Agreement of Sale (which was not registered) be considered for assessing the cost of acquisition.

3) Agreement of Sale was signed on May 22, 2006, while the Sale Deed was signed and registered on August 17, 2006. So which one will prevail to assess the costs of acquisition of the flat?

4) I have not yet decided what to do with the sale proceeds of Rs. 43,00,000, I have received on July 11, 2018, and currently I have parked that entire amount in my savings account only. Since I am retired now and have no other sources of income, I am used a part of this amount (about Rs. 1,00,000/- towards my household and other expenses like medical insurance premium, etc.). Apart this flat which I sold on July 11, 2018, I also have another residential flat (where I currently stay) and two plots in my name.

I assume that I will have about 50% of this sale consideration as my long term capital gain, can I use the rest of the 50% for any other purposes (I am thinking of investing Rs. 10,00,000/- in Pradhan Mantri Vyaya Vandana Yojana of LIC India) and balance amount towards house-hold expenses. And I wish to invest capital gains portion in NHAI or REC Bonds. OR reinvest the entire sale proceeds in buying a new flat. HOWEVER, I HAVE NOT YET FIRMED UP MY PLANS. So please guide me.

My last question is till what time, I can park my sale proceeds in my savings account and when I need to transfer the amount to Capital Gains Scheme Account?

asked Aug 06 at 22:25 by ramanuja9 1


  1. You can consider total cost as 11 Lakh (total paid to builder) + 45,735 (stamp duty/registration charges); if remaining 2.20 lakhs have also been paid from your bank account/cheque/draft. In case you had paid this amount (partly or fully) in cash, please remove that portion as you won't be able to prove that cost.
  2. You can consider total amount paid to builder (from bank account cheque/NEFT/draft) plus the stamp duty/registration charges as total cost.
  3. 17th Aug 2006, date of registration
  4. Please see below long term capital gain computation: Purchase Year = 2006-07, Purchase Cost = 1145735, Cost Inflation Index (CII) for purchase year = 122
    Sale Year = 2018-19, Selling price = 4300000, CII for sale year = 280
    Indexed Purchase price = 1145735 x (280/122) = 26,29,556
    Long term capital gain = 4300000 - 2629556 = 16,70,444
    Income tax on capital gain = 1670444 x 20% = 3,34,088.8
    So in order to save income tax fully you can invest 16.705 lakhs into capital gain bonds u/s 54EC or buy a new residential house property costing more than gains u/s 54. Capital gain bonds have to be purchased within six month of sale for availing income tax benefit.

In case you want to buy property, possession of same should be taken within three years of sale. In case possession is not received by last date of income tax return filing (31st July 2019), the unused capital gain amount (say 2 lakhs paid advance to builder, so remaining 14.7 lakhs) should be deposited into capital gains scheme account.

answered Aug 07 at 11:09 by Pankaj Batra 5.2k320

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Asked: Aug 06 at 22:25

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Last updated: Aug 07 at 11:26