INCOME TAX CAPITAL GAIN

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This discussion explores capital gains tax implications for a property owner selling three units of a house constructed in 2019. Key questions include whether the gain is long-term, if indexation applies to construction costs, and if Section 54 deductions are possible given the multiple units. The advice suggests bifurcating the cost between land and the house, as selling the house constructed in 2019 could result in short-term capital gains.

shrikant

shrikant (Querist)
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14 October 2020 Mr A had purchased a plot in April 2006 (cost of acquisition 6 lakhs). He constructed a house consisting of 3 units in Aug 19 ( construction cost 24 lakhs) . Initially it was constructed considering his family arrangement. Now he wants to sell all the 3 units to 3 different persons with 3 different Sell Agreements. Sale consideration Rs. 18 lakhs for each unit. He is holding one flat as on today along with the above said property. He wants to buy a row house in the year 2021.
1. Whether the gain from above is a long term capital gain?
2. Can he apply indexation for cost of construction?
3. Can he claim deduction u/s 54 ( in view of 3 units on the same land)?

CA Pawan Koradia

CA Pawan Koradia (Expert)
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16 October 2020 First, You have to bifurcate cost as per the area of land originally.
Second, If in the sales deed, land is not mentioned specifically and only house is mentioned then It is house is sold with the land, and the gain from this asset is SHORT TERM(as per house is constructed in 2019 and sold in current previous year).

shrikant

shrikant (Querist)
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16 October 2020 Yes bifurcation with land value can be shown in the deed. But what about type of capital gain for building?

CA Pawan Koradia

CA Pawan Koradia (Expert)
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16 October 2020 I tried to say bifurcation like Land sold for 6L and House Sold for 12L. Otherwise, it is a short term gain

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