IS IT LONG TERM CAPITAL GAINS
This query is : Resolved
11 May 2009
Hi friends,
I am faced with a situation where I have to suggest one of my clients the implication of the situation :
My client is a NRI. He had booked a flat in the year 2005 at kolkata by paying partly out of his savings as well as a loan from a Bank in the US. The purchase price was 50 lakhs.The bank gave the cheque directly to the promoter of the building and my client paid his portion (25 Lakhs) from his NRE A/c.
However, not satisfied with the progress and the qualityof the work, my client decided not to go ahead with the purchase. The promoter gave him the option to sell it to someone elseand has also brokered to get it sold to someone else for 90 Lakhs.
My client has agreed to the proposal. However the question is :
Is the difference of the sale price and the indexed cost of Acquisition a "Transfer" of Capital Asset.It may be noted that my client had not got the flat registered in his name till now. So is he the legal owner at all ? If so is it taxable as Capital Gains? If not, is it taxable under any other heads of income?
Secondly, my client wants to repay the loan taken from the bank in the US. the question is , can he repatriate the profit and repay the loan. Can the amount received from the Promoter be deposited in his NRE A/c. Is there ant legal prohibition under FEMA or any other Act against such transfer.
I hope friend out here would help me find a solution to this problem
Regards and thanx in advance
Sonal
I am faced with a situation where I have to suggest one of my clients the implication of the situation :
My client is a NRI. He had booked a flat in the year 2005 at kolkata by paying partly out of his savings as well as a loan from a Bank in the US. The purchase price was 50 lakhs.The bank gave the cheque directly to the promoter of the building and my client paid his portion (25 Lakhs) from his NRE A/c.
However, not satisfied with the progress and the qualityof the work, my client decided not to go ahead with the purchase. The promoter gave him the option to sell it to someone elseand has also brokered to get it sold to someone else for 90 Lakhs.
My client has agreed to the proposal. However the question is :
Is the difference of the sale price and the indexed cost of Acquisition a "Transfer" of Capital Asset.It may be noted that my client had not got the flat registered in his name till now. So is he the legal owner at all ? If so is it taxable as Capital Gains? If not, is it taxable under any other heads of income?
Secondly, my client wants to repay the loan taken from the bank in the US. the question is , can he repatriate the profit and repay the loan. Can the amount received from the Promoter be deposited in his NRE A/c. Is there ant legal prohibition under FEMA or any other Act against such transfer.
I hope friend out here would help me find a solution to this problem
Regards and thanx in advance
Sonal
11 May 2009
My View is as under :-
1. Although the flat was not registered in your client name it will be capital gain as he has "Right to Buy" that flat and now he is selling his right . LTCG apply here.
2. For this part please refer FEMA regulation for sell and Transfer of assets by NRI , Your Client can do subject to this regulation.
3. Section 195 will apply for TDS
1. Although the flat was not registered in your client name it will be capital gain as he has "Right to Buy" that flat and now he is selling his right . LTCG apply here.
2. For this part please refer FEMA regulation for sell and Transfer of assets by NRI , Your Client can do subject to this regulation.
3. Section 195 will apply for TDS
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