I have a question on Capital Gain Tax. Just to let you know that I have very limited knowledge on Taxation and hence require help.
Issue: I had booked a flat in an under-construction property back in May 2009 at 3,300/- per sqft. I was promised possession in 2012, however, as many other builders did, mine failed to keep their promise. They however, have confirmed that the possession date is sometime in June 2014.
The current rate for the same flat is at 11,700/- per sqft. I want to sell this flat upon possession this year and invest the same money into another under construction project. Reason being - I am planning to get a bigger flat for my family.
Now, I want to know whether I would be impacted by any Tax and if yes, how much. I would appreciate if anyone can help me out on this please.
17 April 2014
Your question can be answered in the following way:
Under Sec 54 of the Income tax Act, any long term capital gain arising to an individual or HUF when they sell a residential property & invest the capital gains in buying another one within 2 years of sale or if the property they are purchasing is under construction & they get the possession within 3 years of acquisition , then the entire capital gain will be exempted upto the amount of investment made in the new property or capital gains whichever is lower.
But the point is that the capital gain should be long term in nature i.e. they have to hold the property after possession for minimum of 3 years.
In your case you will get the possession of the property in June, 2014, thus to get the benefit of sec 54 , you have to hold the property for a minimum of 3 years.
The property am planning to sell is the one am awaiting possession this year. This wasn't an investment and is my first owned property to be frank. However, am planning to sell it for the reason of getting another place which would be slightly bigger in size.
So, when I get possession of this property in June 2014 and plan to sell it in July 2014, how much would I be taxed?
I was intending to buy another property under construction, as the price of that property is at par to the current one am willing to sell.
Please sell before taking the possession. What you would selling is the right to possession which shall be a long term asset. please reinvest the whole of the proceeds in July to buy the new house to claim complete exemption from any tax.
CAclubindia
