• Dec
  • 10
  • 2013

Sale of Under Construction Property – Taxability, Nature of Gain, Date of Indexation, Benefit U/s. 54 or 54EC

CA Sandeep Kanoi

Taxability  of Capital Gain on sale of  under construction property, Nature of Gain, Date of Indexation, Availability of benefit under section 54 or 54EC

Background -Developer engaged in the business of Property invites buyers for purchase / bookings of property at much earlier stage than construction thereof. Accordingly, the intended buyers book the property rights and advance payment for booking is made. Further, payments are made to the developer as and when demanded and also with the progress in the construction. Possession of the property is made available to the intended buyers after 3-4 years of the booking and may be sometime even longer period. In between many times intended buyers transfer their rights to other parties. Similarly, many buyers transfer the property after they have obtained possession from the developer. The issue normally arises in the context of transfer of rights in the property under construction as well as transfer of property after taking the possession thereof as regard the point whether gain on transfer is short term or long term. In other words, question normally arises as regards date of acquisition of rights in the property. In this context it is stated that at the stage booking is made by the intending buyer with the developer many times even the specifications / description of project are not available and confirmation as regards the property rights is given by the developer after a lapse of time. In this regard one view can be that the intended buyer has acquired the rights as soon as he has given the initial advance though specification in regard to project / property are not available. The other view can be that the right would come into existence when the developer confirms the bookings and issue necessary allotment letter to the intended buyers after the project has been properly described. It is stated that the date of acquisition of the rights would depend upon facts of each case and the documents executed / provided by the developer to the intended buyers. In case of initial advance if there is no commitment or allotment by the developer, same may not amount of acquisition of rights in the property. Property rights may generally be acquired by the intended buyer only when an allotment letter specifying the project etc. has been issued.

In case the intended buyer transfer his rights in the property during the period when construction is in progress and he has not obtained possession of the property, the right of the buyer would be in the nature of capital assets and accordingly, gain arising on such transfer would be in the nature of long term or short terms gain depending upon the period of holding.

In case of transfer of property after possession has been obtained by the buyer from the developer on construction of the project, a question normally arises whether the period prior to taking of possession of the property, during which period  it  was  only the right available to the buyer,  is  to  be  reckoned  for  the  purpose  of  determining whether the capital gain is short term or long term or not. In this regard contention is normally raised that rights in the property is a capital asset of different nature than the property. Therefore, period prior to taking of possession is not to be considered. It is, however, stated that the buyer gets possession of the property in continuation of his holding of right in the property. It cannot be said that in terms of Section 2(47) of the Act assessee has transferred his rights in the property held earlier to acquire the actual property. It is not a case of sale or exchange. Buyer continues to hold the capital asset. Only its form changes on getting actual possession of the property. Therefore, it cannot be said that period of holding would be counted only from the date of getting the possession. Accordingly, the earlier period is also to be counted for the purpose of determination of nature of the capital gain, whether short term or long term.

PREFACE-

You have approached us to give opinion on the question related to capital Gain on Sale of Flat, which was booked under construction and sold after receiving the possession of the same.  You have submitted us the following documents:-

1. Payment Receipt From the Builder as per details given below :

Receipt Dated Rs. Remark
No.      
351 21.06.2007 887400 Flat on 2nd Floor
456 06.09.2007 295800 Flat on 2nd Floor
487 30.09.2007 295800 Flat on 2nd Floor
606 12.12.2007 500000 Flat on 2nd Floor
625 31.12.2007 500000 Flat on 2nd Floor
626 31.12.2007 53800 Flat on 2nd Floor
634 31.12.2007 500000 Flat on 2nd Floor
690 11.03.2008 261600 Flat on 2nd Floor
691 11.03.2008 500000 Flat on 2nd Floor
770 21.06.2008 210800 Flat on 2nd Floor
1171 24.03.2011 210800 Flat on 2nd Floor
1172 24.03.2011 160000 Flat on 2nd Floor (Society Deposit)
TOTAL   4376000

2. Demand Letters From Builder as per detail given below:-

Dated Demand Amount
14.08.2007 1220600
23.08.2007  1421400
12.01.2008 761600
07.02.2008 761600
24.05.2008 210800
4376000

  3. Allotment Letter from Builder dated 21.06.2007.

4. Photocopy of Sale Agreement with Builder dated 31.12.2009 which got registered on 01.02.2010 showing stamp duty Payment of Rs. 2,02,650/- and Registration Charges of Rs. 31,500/-.

5. Sales Agreement dated 07th July 2011 which registered  also on 07.07.2011 for Rs. 1,00,80,000/-

6. Reply from Builder in respect of our request for possession dated 25.03.2011 which seems to be possession letter too although explicitly it’s not a possession letter.

FACTS OF THE CASE

  • The Assessee is a individual who has booked a flat with a Builder in Malad (W) on 21.06.2007 and Builder has given the Allotment letter on the same date.
  • Total Agreement Value of the Flat is Rs. 42,16,000/- which Assessee has paid in Ten Installments spread over financial Year 2007-08 and Financial Year 2008-2009.
  • In addition to above Assessee has incurred the following expenditures in respect of Purchase of above property:-
Date Nature of Payment Rupees
31.12.2009 Stamp Duty 2,02,650/-
01.02.2010 Registration Fees    31,500/-
24.03.2011 Society Deposit   1,60,000/-
Total     3,94,150/-
  • Assessee’s Agreement for Purchase of this Property got registered on 01.02.2011.
  • Assessee Receives possession of the Flat on 25.03.2011.
  • Assessee Sold the Flat on 07th July 2011 for Rs. 1,00,80,000/-.

QUESTIONS ASKED BY THE ASSESSEE :-

  1. Whether the Right to own the Property is a Capital Asset ?
  2. Whether Gain on sale of Flat will be short Term or Long Term?
  3. If the Gain is long term how the indexed cost will be calculated?
  4. Is there a way Assessee can save tax on Gain on Sale of Flat?

OUR OPINION:-

1. Whether the Right to own the Property is a Capital Asset?

Bombay High Court has explained definition of capital asset as defined u/s 2(14) of the I T Act in the case of CIT vs Tata Teleservice Ltd 122 ITR 594  and has held as follows :-

What is a capital asset is defined in section 2(14) of the I.T. Act, 1961. Under that provision, a capital asset means property of any kind held by an assessee, whether or not connected with his business or profession. The other sub-clauses which deal with what property is not included in the definition of capital asset are not relevant. Under section 2(47), a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or the astonishment of any right therein or the compulsory acquisition thereof under any law. The word “property”, used in section 2(14) of the I.T. Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words “of any kind” Thus, any right which can be called property will be included in the definition of “capital asset”. A contract for sale of land is capable of specific performance. It is also assignable. (See Hochat Kizhakke Madathil Venkateswara Aiyar v. Kallor Illath Raman Nambudhri, AIR 1917 Mad 358). Therefore, in our view, a right to obtain conveyance of immovable property, was clearly “property” as contemplated by section 2(14) of the I.T. Act, 1961.

Other case law on the same issue favoring the above views of Bombay High Court are as follows:-

  1. CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441 (Bom.).
  2. ITO v. Smt. Kashmiraben M. Parikh [1993] 66 Taxman 31 (Ahd.) (Mag.).
  3. Tribunal order in ITA No. 3923 (Mum.) of 2002 for assessment year 1995-96 in the case of Mrs. Manju Agarwal v. Asstt. CIT, Mumbai ‘C’ Bench order dated 16-9-2004.
  4. Jitendra Mohan v. ITO [2007] 11 SOT 594 (Delhi).
  5. CIT vs Jindas Parchand Gandhi (2005) 279 ITR 552 (Guj)

 In our case as allotment letter issued by the builder dated 21.06.2007 gives us the  right to obtain conveyance on the said flat so it become an assets under section 2 (14) of the Income Tax Act, 1961.

2. Whether Gain on sale of Flat will be short Term or Long Term?

An asset which is held for 36 months is a long term asset.

Whether it is held for 36 months?

Once the right to purchase ( i.e obtain conveyance ) proved to be an asset, it is to be seen when was this right vested in the purchase.

Hon’ble Andhra Pradesh High Court in the case of M. Syamala Rao v. CIT [1998] 234 ITR 140 held that registration of a document related back to the day on which the agreement of sale was executed, hence, when the builder executed the agreement of sale on 7-8-1993, the assessee was to be deemed to be owner of property from that date and, accordingly, the capital gain was to be worked out.

In our opinion, the date of allotment is the date when the right of conveyance get vested. So, if there is difference of 36 months in this date and date of sale , then it can be considered that the said asset was a long term asset and gain on sale of such asset was “Long Term Capital Gains “.

In our case, the allotment date was 31.06.2007 and as such on the date of sale, this right was held for more than 36 months so gain on sale of  Flat will be Long term Only.

3. How Indexation is to be done?

The issue gets settled by Mumbai Tribunals’ decision in case of Smt. Lata G. Rohra v. Deputy Commissioner of Income-tax, C.C. 39, Mumbai [2008] 21 SOT 541 (Mum.) where is the facts of the case were as under :-

FACTS

The assessee vide unregistered agreement with a developer purchased a flat in 1993 which was constructed in the year 1997 and registered in the year 1998. During the relevant year, the assessee sold said flat and after claiming the indexed cost at Rs. 18.74 lakhs showed long-term capital gain at Rs. 39.42 lakhs. The Assessing Officer worked out indexed cost of acquisition on the basis of purchase price from 1993 and completed the assessment. However, the Commissioner was of the view that the assessee had not filed any evidence with respect to various payment made towards the purchase price and the indexed cost of acquisition worked out on the basis of financial year 1993 was incorrect and, hence, the assessment order was erroneous and prejudicial to the interest of revenue. Accordingly, he initiated revision proceedings under section 263.

The Commissioner, however, set aside the order of Assessing Officer and directed the Assessing Officer to compute the correct long-term capital gain by adopting the indexed cost of acquisition on the basis of the date on which the property was held after registration of the conveyance deed. In instant appeal, the assessee contended that she was deemed to be owner for property from 7-8-1993 and, accordingly, the capital gain was to be worked out from that date as per Explanation (iii) to section 48, and since the asset had been held for the first time in 1993, cost inflation index of that year was to be applied on the total purchase consideration payable by the assessee as per agreement regardless of the dates of the actual amount paid by her.

HELD

As per section 2(14), read with section 2(14)(vi), the rights in flat, acquired by the assessee on execution of purchase agreement on 7-8-1993, came within the purview of the term ‘capital asset’. From the perusal of language used in Explanation (iii) to section 48, which provides for manner of computation of indexed cost of acquisition, it is apparently clear that it refers only to date of cost of acquisition of the asset and not actual payments made by the assessee. Hence, there was no merit in the contention of the revenue that the benefit of indexation should be given on the basis of dates of actual payments made by the assessee. Thus, on merits, the issue was covered in favour of assessee. However, regarding jurisdiction for invoking the provisions of section 263, it was found that the assessee filed necessary details before the Assessing Officer and the Assessing Officer had passed assessment order after taking into consideration the same. Hence, merely for the reason that no specific findings had been given in the assessment order, the same could not be said have been passed without application of mind. In this view of the matter, the order under section 263 passed by the Commissioner was to be set aside. [Para 9] In the result, the appeal filed by the assessee stood allowed. [Para 10]

So in our case we will take the index of the year in which Assessee receives allotment letter of the Flat i.e. 2007-08.  In respect of Stamp Duty, Registration Charges, Society Deposits we will take index of the year of payment. If Assessee has incurred any other expenses in respect of Purchase of property in addition to these in respect of those expense also we take index of the year of expense for calculation of Long Term Capital Gain as what tribunal has stated above is cost of acquisition i.e Rs. 42.16 lakh which should be taken to compute the long term capital gains as the word used in Explanation to section 48 mentions “Cost of acquisition and not the actual payments.

Here we would also like to refer Judgment of Delhi ITAT in the case of Praveen Gupta vs ACIT -ITA No. 2558/Del/2010; Asst. Year 2007-08 in which Honourable ITAT has taken indexation on the basis of Payment made by the Assessee but since Assessee is based in Mumbai so for us ITAT Mumbai Judgment is more relevant and at the same time same is more beneficial to us too.

5. Is there a way Assessee can save tax on Gain on Sale of Flat?

Yes, The Provisions of Income Tax Allows the assessee to save capital gains tax on sale of a property, namely Flat in our case. This benefit is provided under Sections 54 and Section 54EC of the Income Tax Act, 1961.

SECTION 54

Condition to be satisfied to claim exemption Section 54 of the Income Tax Act, 1961.

1:   Assessee should be Individual/ HUF.

2:   The Asset should be Residential Property whether self occupied or not.

3:  The Property Should be classified as a Long term Capital Asset under Income tax Act, 1961.

4:  The Assessee purchases a new residential house within a period of one year before or two years after the date of transfer/sale of the asset or he constructs a residential house within a period of three years after the date of transfer/sale of the asset.

5: In Case, if the assessee is not able to utilize the amount of capital gains for acquisition of new asset before the due date of furnishing the return of income and thereafter the assessee can deposit the same in and account with any specified bank or institution under capital Gains Accounts Scheme framed by the central government and all payment related to new assets will be made from this account.

6:   The Cost of the new purchased asset or constructed aseet should be equal to or exceed the amount of indexed capital gains earned on the sale of the property.

Where the amount of Capital gains is greater than  the cost of the new asset, the difference between the amount of capital gains and the cost of the new asset will be chargable as “ Long Term Capital Gains” of the previous year in which the asset is sold.

Conditions to Be Satisfied after availing the exemption under Section 54:

1: The Assessee should not sell the new asset within 3 years from the date of its purchase or construction.

If he does that the cost of the new asset will be reduced by the amount of capital gains exempted from tax earlier and the difference between the sale price of the new asset and such reduced cost will be “ Short Term Capital Gains” and treated as the income of the previous year in which the new asset is sold.

SECTION 54EC

Condition to be satisfied to claim exemption Section 54EC of the Income Tax Act, 1961 -  Section 54EC provides that where the capital gains arises from the transfer of the “ Long Term Capital Asset”, it will be exempted if the assessee has invested the capital gains in the Long Term Specified Asset subject to the following conditions:

1: Capital Gains should arise from the transfer of the long term capital asset.

2: The Assessee should invest the capital gains amount within a period of six months after the date of transfer/sale in the long term specified asset. The investment in any financial year is not allowed to exceed Rs. 50,00,000/-

Long term Specified Asset is defined to include any bond redeemable after three years issued on or after 01.04.2007, by the National Highway Authority of India(NHAI), or by the Rural Electrification Corporation Limited(RECL),

3; The Cost of the Long Term Specified Asset is not less than the capital gain in respect of the original asset. If The cost of the Long Term Specified Asset is less than the capital gains, then only proportionate capital gains will be exempt to the extent it is invested.

Conditions to be satisfied after availing the exemption under Section 54EC:

1: The Assessee has to retain the Bonds for a minimum period of three years from the date of acquisition.

2: The Assessee should not transfer or convert into money or should not take a loan against pledge or security of the Bonds that he has invested in, to avail exemption under section 54EC, during this three years.

3: If he does that the amount of exempted capital gains on transfer of original asset will be deemed to be “Long Term Capital Gains”

Of the previous year in which such long term specified asset is transferred or converted into money.                                                    

                                                        OR

Of the Previous year in which the loan or advance is taken against security of such long term specified asset. It should be noted that irrespective of the quantum of loan or advance taken, the entire exempted amount of capital gains will be brought to tax.

Where the cost of long term specified asset is also eligible for deduction under section 80C, the said deduction will not be allowed, if he takes the exemption under section 54EC.

SUMMARY –

1. Whether the Right to own the Property is a Capital Asset –             Yes.

2. Whether Gain on sale of Flat will be short Term or Long Term?  Long Term in our Case

 3. If the Gain is long term how the indexed cost will be calculated?

So in our case we will take the index of the year in which Assessee receives allotment letter of the Flat i.e. 2007-08.  In respect of Stamp Duty, Registration Charges, Society Deposits we will take index of the year of payment. If Assessee has incurred any other expenses in respect of Purchase of property in addition to these in respect of those expense also we take index of the year of expense for calculation of Long Term Capital Gain

4.   Is there a way Assessee can save tax on Gain on Sale of Flat?

The Provisions of Income Tax Allows the assessee to save capital gains tax on sale of a property, namely flat in our case. This benefit is provided under Sections 54 and Section 54EC of the Income Tax Act, 1961.

(Republished with Amendments)


32 Responses to “Sale of Under Construction Property – Taxability, Nature of Gain, Date of Indexation, Benefit U/s. 54 or 54EC”

  1. Allan says:

    Hi there! This blog post couldn’t be written any
    better! Looking through this article reminds me of my previous roommate!
    He always kept talking about this. I am going to send this article to him.
    Fairly certain he’ll have a very good read. Thank you for sharing!

  2. TANAY SAHA says:

    I HAVE PURCHASED RESIDENTIAL LAND ON 30.06.2011 AND SOLD ON 16.07.2014. THEN IT WILL BE CONSIDERED AS SHORT TERM OR LONG TERM CAPITAL GAIN

  3. DEEPAK says:

    PLS CLARIFY THIS THAT IF HOUSE SOLD IN JAN 2011 AND REINVESTED THE ENTIRE AMOUNT COMING OUT SALE WITHIN SIX MONTHS i.e. MAY 2012 INTO A UNDER CONSTRUCTION FLAT WITH THE PURPOSE OF SAVING LTCG TAX. UNFORTUNATELY POSSESSION OF THE HOUSE IS DELAYED BY ANOTHER ONE YEAR FROM BUILDER’S END.

    Q 1. HOW SHOULD WE CALCULATE THE START AND END DATE OF THREE YEAR PERIOD FOR POSSESSION OF THE FLAT TO SAVE LTCG TAX. SHOULD THIS BE FROM 31ST JULY 2012 TO 31ST JULY 2015 ?

    Q 2.WHAT SHOULD WE DO TO AVOID LTCG TAX?

  4. aparna says:

    HI

    I had purchased land. Date of agreement to sale is 31 july 1998 for Rs. 30000. This was paid in instalments of Rs 500 per month till 2004 and after completion of all instalment registration was done in 2004.How indexation should be done.

  5. Raj says:

    Hi,

    We (Myself, Wife & Brother) intend to purchase plot and construct house over it within 6 months of selling 2 Property (1 hold jointly by myself and wife: Under Construction but allotment letter dated July 2010) & (2 property of my mother). The amount collected from selling will be equal/higher to cost of new house (purchase of plot, repayment of principal of loan & construction).

    Will we be liable to pay long term / short term capital gain tax, as reinvesting into property within 6 months for stay purpose (will hold more than 3 years)?

    As i heard:

    1. Under construction property so 20% short term capital gain tax. And investing in jointly with brother so no exemption.

    2. Mother Property – 10% long term capital gain tax as hold for more than 3 years but jointly purchasing / even giving it to son for purchase of property.

    3. Should I include her name in the property ?

  6. ashish khilari says:

    Dear SIr,

    I have purchased 1 flat under construction and flat is also registered in my name & now i want to sale the flat what so i can sale my flat & how what is the refund amount i paid stamp duty,registration fees, service tax,vat pls advice

  7. Vipin jain says:

    I have purchased an under construction property (flat) in January 2010, I still to date have not registered this property as project is still under construction. Now since I have hold the property for more than three year in under construction stage, if I sell this property (flat) would the capital gain be considered as long term so as to avail tax benefit? Or I have to register this property and again has to hold for more than 36 months to have such benefits.

  8. Anil says:

    No comment

  9. For sure we can. YOu may mail your details on info @ taxguru.in . Please remove the space from mail id

  10. SK Sharma says:

    Dear Sandeep sir,
    Thank you for your reply but most of the CAs are of the opinion that after taking the possession of an under construction flat, date of acquisition is the date of possession, not the date of allotment. In fact, many CAs advise to sell before taking possession to decrease tax liability, if the person wants to sell in near future. Can you defend a case where an under construction property is sold after taking possession. 36 months have passed after the date of allotment but only 3 months have passed after taking possession.
    Thanks.
    SK Sharma

  11. Dear Sir,

    I have not defended any such case. The view are based on judgment of court. The views includes judgments from High court. As per my knowledge Till date no HC has given adverse opinion on the same.

  12. SK Sharma says:

    I like this article because it is favourable to us but there are conflicting views on this issue, even among CAs, particularly on the date of accusion of a property which was sold after possession. Writes view seems to be correct but more important is that if the IT department and court also agrees with his views. Has the writer defended any case successfully regarding date of accusion of a flat which was sold after taking possession. I want answer from the writer of thearticle. Will he please oblise?
    Thanks.
    SK Sharma
    Mumbai.

  13. CA Tarun Batra says:

    Every case has to be seen from its own prospective.In the case refered by you,
    capital asset is acquired on completion of final payment and that’s why they have taken indexed cost of each installment.

  14. Chintan Gandhi says:

    Where after issuance of allotment letter of a plot, assessee made payments from time to time in instalments, in view of fact that assessee sold said plot after holding it for more than three years, long term capital gain was to be calculated taking into account indexed cost of acquisition as per payment schedule
    ■■■
    [2012] 17 taxmann.com 127 (All.)
    HIGH COURT OF ALLAHABAD
    Nirmal Kumar Seth
    v.
    Commissioner of Income-tax*
    DEVI PRASAD SINGH AND DR. SATISH CHANDRA, JJ.
    IT APPEAL NO. 11 OF 2007
    OCTOBER 14, 2011

    In light of above decision, indexation benefits shall be w.r.t year of payments

  15. CA Tarun Batra says:

    Dear Parvin,
    It is covered u/s 2(47) definition of transfer of capital assets.As per section 54 if you will transfer the property within 3 years then you cannot avail the exemption.

  16. Pravin says:

    Thanks Mr.Tarun,

    But Gifting of property to son is not regarded as Transfer as per section 47. Since the Gift tax Act is not alive, whether the term “Settlement” would be covered under “Gift” or 3 years lapsing is the only option?

  17. CA Tarun Batra says:

    Dear Parveen,
    You cannot transfer the property to anyone within three years iy you want to avail exemption.

  18. Pravin says:

    After selling the property and buying a new one to avail the benefit of exemption u/s.54, Can the assessee settle the new property to his son within 3 years without being affected by tax implications?

    What is the amount to be taken as cost by his son? Original cost of new asset or zero?

  19. s.ramamurthy says:

    thanks for the thought provoking article.mai i pose a question.
    what about the postion on prpoerty transfered through assignment deed?

  20. CA Tarun Batra says:

    For Any Kind of income tax conultancy contact me
    M: 09888004543

  21. Chirag Jain says:

    Dear All,

    Please post your queries to the mail id: cachiragbaid@gmail.com. You will get your replies within 24 hours.

  22. K K Saraogi says:

    A detailed article on gain on sale of under construction house by Mr. Sandeep Kanoi is very good and informative.
    K K Saraogi

  23. nitin mulay says:

    I have booked a flat in mar 2011. Builder has agreed to give me the possession in mar 2013. however still the work is in progress. Meanwhile since i need money to solve problms in my family business, I want to sell the right in the flat. Still I have to payment near about 5 lakhs to builder. Whether I can sell the property ?
    total agree ment cost is 20,50,000.00. I have paid 16,79,000 to builder.
    I really dont understood anything in the above discussions. I want to know whether
    selling the right in the property will be treated as capital gain ? I think it is.
    Then how to get exemption from the long term/ short term capital gain tax ?
    What is the percentage of tax ? and how it is calculated ?

  24. sanjay says:

    Here is my query for computation of Capita Gain:

    Small History

    1. I was allotted a villa by Omaxe in Bhiwadi on 1st Jan 2008
    2. Since I opted for down payment plan, I paid 95% to builder upfront by way of Finance by Axis Bank and by my own savings
    3. The paid up amount by Bank was Rs 12 Lacs and from my side around 18 Lacs. The total 95% paid was approx.. 30 Lacs
    4. I received the letter from builder for balance 5% in June 2011 and the same was paid.
    5. Builder issue a letter allowing us to undertake Puja, or small renovation after receiving full payment
    6. Accordingly, now the villa is in our possession and has our lock and key

    If I want to sell this villa now at 70 Lac, I would earn a profit of around 40 Lacs

    My Question

    1. Which date would be considered for calculation of Capital Gain?
    2. Allotment date in 2009 or Date on which we paid and balance 5% in 2011?
    3. Would this qualify for STCG or LTCG
    4. If I reinvest full realization of 70 Lac, do I still need to pay Capital Gain
    5. Or what would be the best way to avoid CG tax

    Regards,

    Sanjay Sharma

  25. RAVI BATRA says:

    It is good interpretation of Law and incontinuation of previous opinion on the subject matter, I would like to ask the following:

    1. Supoose in the above mentioned case we get benefit of Section 54 and as per opinion and law we need to invest further as mentioned under Law- My Question is: CAN WE INVEST IN PROPERTY FOR WHICH ALLOTTMENT LETTER IS GIVEN IMMEDIATELY BUT POSSESSION WILL BE GIVEN IN NEXT 3 YEARS AND IN THIS CASE AMT TO BUILDER WILL BE PAID AS PER CONSTRUCTION LINKED PLAN.

  26. Manoj says:

    Dear Prashant and all other,

    I would like to ask same question. request to guide me for the same

  27. Ajit says:

    I checked the same with 3 different CAs but everyone responded to me in negative that a residential booking will not be termed as a capital asset and will be taxed as per the highest slab in the year of sale irrespective of the number of years it was held.

  28. Abhishek Shaw says:

    Hi, I purchased an under-construction flat in Oct-2010 and registration was done in Dec-2010. I will be getting the possession of the flat in 2-3 months. I want to sell this flat and buy another one. Just wanted to check whether can I delay the possession until Nov/Dec 13 and claim long-term gain capital gain on property and invest it another flat or whether it would be classified as short-term and I need to pay the taxes.

  29. ARUN GARODIA says:

    suppose a person purchased a residential flat to save capital gain and sold after 3 years of full payment of flat in 2009 without getting the possession of flat. whether exemption claimed on capital gain be taxable in such situtation

  30. Prashant says:

    my is also similar case. Should I treat this as long term

    purchase date / allotment date 2007 : Amount Rs. 60 Lacs
    possession  date is 2010 : Amount Rs. 10 Lacs
    registration date is  2011 : Amount Rs 5 Lacs
    total purchase cost : 75 lacs

    Sales Date is 2012 : Amount Rs. 105 Lacs

    Profit : 30 Lacs  (To ascertain whether long term or short term) 

  31. ABHISHEK CHATTERJEE says:

    In the above post its written, the amount need to be invested BEFORE DUE DATE OF FILING OF RETURN.PLS CLARIFY THIS THAT IF HOUSE SOLD IN FIN YEAR 2012-2013 MEANS THAT THE DUE DATE FOR THIS IS IN AY2013-2014 OR IN JULY/SEPT 2012 ITSELF.

    SECONDLY HOW TO SHOW THE COST OF CONSTRUCTION OF BUILIDING FOR CLAIMING THE DEDUCTION UNDER SECTION 54 OF INCOME TAX ACT.

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