Capital gains on redeveloped house property

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This query is : Resolved

Ajaya Bhat (Querist)

09 March 2019 Dear All

My residential flat in Mumbai was acquired by a builder for the purpose of redevelopment. In return, we received hardship allowance, rental reimbursement, shifting allowance and finally a new flat against the redeveloped one on 3 years time.
I have now decided to sell the newly redeveloped house property and want to understand the tax implications.

Important time frames of the deal -
Acquisition year of the original house property - 1986
Date of registration of agreement with the developer - Dec 14
Date when possession was provided by developer for the newly developed property- May 18

Queries assuming I sell the house property in 2019 (After April)
Will the sale be considered LTCG or STCG?
What will be the Cost of acquisition on this sale?

K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)

09 March 2019 In case of redeveloped house property, capital gains arises two times - First, when the possession of the redeveloped house is received. In the above case during May 2018. second, when the redeveloped house property is sold. In your case, the sale is within two years, therefore short term capital gains in nature

K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)

09 March 2019 When the possession is received, a completion certificate has to be obtained from the local authority. Cost of acquisition will be the stamp value of the property as on date of receipt of completion certificate

Ajaya Bhat

Ajaya Bhat (Querist)

09 March 2019 Hi Srinivas,

Many thanks for getting back. Can you help me understand the nature of the capital event which happens when the possession is received and how the taxation should work?

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