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Capital gain on tenancy propertt

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afreen shaikh

139 Points Posted on 12 October 2023

tenancy flat was converted into ownership of property by lanldlord of building than after five years building went for redevelopment and new flat was given with additional area. what should be cost of property. M.V. can be considered when landloord converted into ownnership property??? no cost has been paid to landlord. now if property is sold (by tenant) what will be cost price of flat to be considered for capital gain

Replies (2)

Quick Summary

This discussion clarifies capital gains tax implications when a tenant acquires ownership of a property and subsequently sells it. It covers determining the cost of acquisition, which includes any price paid for ownership and potentially the cost of earlier tenancy rights. The holding period for capital gains tax purposes is also addressed, with a focus on whether the tenancy period can be included. Finally, it outlines how to calculate long-term capital gains and mentions available reliefs like reinvestment under Section 54.

sabyasachi mukherjee

Profession

19978 Points Posted on 12 October 2023

Cost has been paid to landlord

Aashok Kumar Sharma

Finance/Compliance Consultant

75870 Points Posted on 08 November 2026

Tenancy converted into ownership, then sold:

• If the tenant acquired ownership of the flat from the landlord (by paying a price), the cost of acquisition of the flat = the price paid for ownership plus the cost of the earlier tenancy rights (if purchased, otherwise nil). Courts have held that a tenant converting tenancy into ownership has a continuing holding: the holding period may include the tenancy period (substantial rights were held), but many treat the ownership date as the acquisition date.

• If sold 5 years after acquiring ownership, it's long-term either way. LTCG = sale price minus (cost of ownership plus tenancy cost, indexed if opting). For sales after 23 July 2024, the lower of 12.5% or 20% with indexation (resident).

• Sec 54 is available for reinvestment in a residential house.