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Capital gain on builder flat after possessin

12 August 2016

This is regarding IT Act Sec 50 and 56A. 4 years ago, I have a bought a property at 25 lakhs which was under construction (builder flat). Now, I have taken the possession and registry is done on the circle rate, which is 75 lakhs now.

So, is this difference (75-25)=50 lakhs will come under my capital gain as per Section 50 and 56A? If not, what is the alternate to avoid this gigantic tax? Any help shall be highly appreciated.

Regards Himant

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 12 August 2016

Please not that as per amendment in the Union Budget 2016-17 As Below:::

Rationalization of section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property

50C proposed to be amended in line with section 43CA to provide that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer.

It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement of transfer.

Himant Srivastava (6 Points)
Replied 12 August 2016

Thank you for your prompt help!

I am not from financial background. As per my understanding, Section 43CA is not applicable for capital assets. And you mentioned that it is proposed to amend Section 50 in line with Section 43CA. So, it means that my property should be valued at circle rate which was 4 years ago.

Please confirm.

And please tell if amendment of Section 50 is still on proposal stage or implemented.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 12 August 2016

1. The Finance bill 2016, has been passed and authenticated by President.

So, the provision is applicable in your case, Only thing you will be required to prove is the circle value/FMV of the flat, 4 years back was Rs. 25 Lakhs.

Himant Srivastava (6 Points)
Replied 12 August 2016

Thank you again for your help.

I referred to Finance Bill 2016 wherein following is stated for the above subject:

"These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years."

So, if year of registry of the property is FY 2015 or earlier, then this amendment will not be applicable to my case. Please correct me if I am wrong.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 12 August 2016

"I have taken the possession and registry is done on the circle rate, which is 75 lakhs now."

It means you have registered in the FY 2016-17. (say June-July 2016)

"These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years."

It means Financial Year 2016-17; and afterwards. So, it is applicable in your case.