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Sale of flat a ltcg or stcg?

Shorya (Trader) (25 Points)

18 September 2014

Hi

I have this query regarding my recent sale of a flat which I bought in Faridabad. The payment flow is as follows

2009-10 - 7.3 lacs

2011-12 - 4.8lacs (inclusive of 15k interest paid to home loan)
2012-13 - 16.3 lacs (inclusive of 2.2 lacs interest to construction company)
2013-14 - 3.1 lacs

2014-15 1.23 lacs (incl. of 20k interest paid to construction company)

all the above stated amounts are also inclusive of service tax at 3.09%

i got the allotment letter in 2009-10 and posession letter in june 2014

I sold the flat in sept 2014 for 38.5 lacs

1. what would be the tax consideration in this case? would it be an LTCL or STCG?

2. How shall the LTCL/STCG be calculated?

3. would interest paid to builder and home loan company be considered as cost incurred?

4. what shall be the treatment of service tax paid?

5. What tax benefits am I entitled for after this transaction?

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4 Replies

(Guest)

Greetings Shorya,

1. As you have received the allotment letter in 2009-10, the holding period is more than 36 months and hence it's a LTCG.

2. Calculation of LTCG:

You will get indexation benefit right up to the payments prior to 12 months. You can include interest amounts and service tax amounts in the cost and then calculate indexed cost using the Inflation indices against each year to arrive at total ICOA.

3. Yes both are to be capitalised. Refer CIT vs. Raja Gopala Rao (2001) 252 ITR 459 (Mad):

Here, there can be no doubt that the cost of acquisition to the assessee was not merely the amount that he had paid to the vendors but also the cost of the borrowing made by him for the purpose of paying the vendor and obtaining the sale deed.Without the money borrowed, the assessee would not have been in a position to buy the property. Payment of consideration for the sale indisputably having been made with the borrowed funds, the borrowing directly related to the acquisition and, interest paid thereon would form part of the cost of acquisition.

4. Service tax paid is capitalised as a part of your property cost.

5. Benefits: You can re-invest 'the gains" in another residential property , or keep it in Captial gains account with any nationalised bank or invest the gains in NHAI/REC Bonds up to 50 lakhs within 6 months of tranfer. Your gains are less than 50 lakhs so that should be the most preferred option here.

Kind regards.

1 Like

Shorya (Trader) (25 Points)
Replied 30 September 2014

Thanks a lot sir,

I need a clarification

1. I have the POSESSION letter dated June 2014 and ALLOTMENT letter dated 2009-10
so which is to be considered?

2. Also if I index the whole amount I would end up with a long term capital gains loss can I offset it against any other gains made?

3. In case of a long term capital gains can I offset any short term capital loss against it?

Thanks in advance

Rahul Gupta (Manager) (153 Points)
Replied 27 August 2015

@ Bhadresh

I differ from you view. In case of possession, the holding period starts from date of possession.

It will be considered as STCG.

Also to add: Assesse can take home loan interest benefits from the posession date.

(Guest)

@ Rahul

Thanks for your comment. Sometimes there are contradicting views on the same issue and so its best to judge the veracity of the opinions after citing case laws/section references. Please, can you also quote the exact source of your opinion as it will be much helpful to us all for future references.

Until then, I still stand by what I said. There is this fairly compendius article about the issue should you kindly want go through it, link: https://www.moneycontrol.com/news/tax/durationcap-gains-must-be-baseddateallotment_981630.H T M L

Keep us posted. Thanks.

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