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Capital gain

ranu (student) (64 Points)

30 May 2016

Date of purchase for capital gain exemption , purchase of new property from builder-date of allotment or date of registry or whether possession letter date for consideration of purchase within one year

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3 Replies

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 30 May 2016

Hi Ranu,

In order to avail exemption under capital gain tax from sale of property, Sec 54. states that a residential property should be purchased within one year from the date of sale.

The date of purchased for this section would be considered from the virtue of Transfer of Property Act 1882, which states that a transfer of property passes forthwith to the transferee when all the interest which the transferor is then capable of passing in the property, hence when full and final payment has been made to the seller, the buyer is deemed to have the legal possesion of the property even though the transfer deed or documents have not been registered in the buyer name.

Thereby the date of purchase shall be when full and final payment has been made to the seller for the purpose of claiming exemption.

ranu (student) (64 Points)
Replied 31 May 2016

Thankyou for the reply.

Furthe clarification is needed for: The property was registered as land plus partial construction in 2013 and the final construction is still going on, possession is expected in this year. The payment made from the date of agreement can be claimed or the payment after registry or the payment in last year can only be claimed for exemption.

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 31 May 2016

A very crucial yet a disputed issues regarding the date of acquisition on builder flats as the date of acquisition has been interpreted differently and has led to massive litigation and issues.

For instance, to qualify the investment in case of builder flats, the crucial date is the date of allotment of the residential flat and the payment of installment is a follow up action. Allotment is a sufficient compliance for getting the benefits. Thus, the date of issue of an allotment letter gives a right to the taxpayer (Intended buyer) to obtain conveyance on the said flat so that it becomes an "asset" within the purview of the Income-tax Act. The date of acquisition of the said flat shall be the date on which the allotment letter is issued to the intended buyer.