Taxability - Society under redevelopment

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This discussion clarifies the taxability of consideration received when a flat owner gets a new, larger flat during society redevelopment. If you relinquish rights to a portion of the additional area for a payment, this amount is generally considered taxable capital gains. You may be eligible for exemption under Section 54, provided you meet the specified conditions. The cost of acquisition for the relinquished area will be calculated proportionally.

CA Shraddha Vora

CA Shraddha Vora (Querist)

14 January 2020 Assessee is a flat owner in a society, society is in redevelopment.
Assessee is to receive new flat with additional area of say 500 sq feet against old flat.
out of additional area of 500 Sq feet , Rights on area of 200 sq feet is relinquished to developer against a consideration.
Taxability of such consideration ??

Amol S Joglekar

Amol S Joglekar (Expert)

15 January 2020 As I understand from your contention....existing 1000 sq ft flat under redevelopement, getting new flat of 1300 sq ft + consideration for 200 sq ft. Right?
It is taxable capital gain. Exemption u/s 54 is available, subject to however the conditions of 2/3 years

CA Shraddha Vora

CA Shraddha Vora (Querist)

15 January 2020 You understood situation Rightly..
Now if i don't reinvest amount recd against sale of 200 sq feet, it will be taxable?
Cost of acquisition would be?

CA Shraddha Vora

CA Shraddha Vora (Querist)

15 January 2020 Reference of case law or section ?

Amol S Joglekar

Amol S Joglekar (Expert)

15 January 2020 The mount received is taxable.
..

Amol S Joglekar

Amol S Joglekar (Expert)

15 January 2020 Assuming the cost of acquisition of flat 1000 sq ft is 15 lakh. You can take proportionate cost of relinquished area. i.e. 2 lakh as cost of acquisition.

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