Capital gain

Tax planning 451 views 3 replies

Pratik

79 Points Joined August 2009

Hi, I want to Know about Tax Planning in case of Long Term Capital Gain.

Sale Proceeds received on Sale of Residential House : 2200000

Date of Purchase of land For construction of New House : 21.04.2011

Ownership Transferred to Buyer:20.12.2012

Registry not yet done but sale consideration is received in advance.

Also construction of New house is complete.

My querries are:

(1) What will be date of sale? Date of Registry or Date of transfer of ownership?

(2) What will be Sale consideration? Actual sale consideration received or Registry valy or Fair Market Value?

(3) Whether I can Claim deduction of land purchased for construction as it purchase before sale or trasfer of ownership of asset? (4) Whether I am eligible to calim deduction of cost incurred on construction of new residential because house is constructed before sale and transfer and to claim exemption u/s 54 construction should be completed 3 years after date of transfer.

Replies (3)

Aman Sharma

Student CA Final

73 Points Joined October 2012

1.Date of sale is the date of transfer of ownership which apparently should be the date of execution of sale deed.

2. Sale consideration is the actual amount received.To avoid any suspicion sale below the circle rate is advisable.

3. The deduction u/s 54 is not admissable since the construction or purchase of land was not incidental to sale.As per this section the amount received from sale of residential property should be used on construction or purchase of new house.Hence, purchase or construction cannot precede the sale.

Pratik

79 Points Joined August 2009

Thanks Mr Aman Sharma...

But if actual sale consideration is 1200000 and registry is done for Rs. 850000 then sale value for purpose of capital gain will be 1200000 or 850000?? I think it should be 850000..

As per section 54 sale proceed is not required to be invested for new construction.. This requirement is there in section 54F but not in section 54.. I read it in Singhania...

Am i right??

Aman Sharma

Student CA Final

73 Points Joined October 2012

Hi Pratik...

I would like to correct a misstatement made above.

The land purchased buy you is admissable to deduction since it was purchased in previous year i.e. F.Y just preceding the F.Y. year of sale before.

And as far as ur other queries.

1. Yes the amount of sale consideration will be 8,50,000, but the balance should not be trackable otherwise IT department can gain leverage that the deed was undervalued.

2. And Sec 54F covers Long term capital asset other than residential house and other assets covered in sec 54. So your asset falls under sec 54 as the house sold and land purchased are residnetial properties.