Capital gain tax

Tax planning 347 views 2 replies

Raj

Business

33 Points Joined April 2008

I was allotted a piece of land by HIDCO at New town, Kolkata in the year 2006. After the allotment I had paid all the installments as per the schedule below.

10% as application money in the year 2005

15% in the year 2006 20% in the year 2007

20% again in the year 2007

15% in the year 2008

10% again in the year 2008

10% final in the year 2013. At the time of position of the plot.

The Registry of the Plot was done in my favor in the year Nov.2013.

If I sell the piece of land will the sale consideration be subject to capital gain tax?

The cost of acquisition shall be taken of which year?

Can I avail exemptions and save tax?

Replies (2)

SAURABH NENE

Chartered Accountant

226 Points Joined June 2009

Though you have paid for the land in installments, the acquisition is complete only when land was registered in your name. If you sell the land, it will give rise to a Short Term Capital Gain as 3 years have not complete since acquisition. You have to pay tax on short term capital gain depending upon the slab rate under which your total income falls. The cost of acquisition will be total cost i.e. sum total of all installments. Exemptions are available u/s 54 only for long term capital asset.

Hence it is better to postpone the sale till the land becomes a long term capital asset.

Binod

Student CA Final

386 Points Joined February 2014

Hello, Sir

Following is case law which can help on your case

The Learned ITAT Delhi Bench in a Landmark judgment has held that the asset or right in asset is created when the builder issued an allotment letter to the assessee specifying the actual unit no of the property and any payments made before allotment is to be provided indexation from the date of allotment and any payment made after is to be provided benefit of indexation from the date the payment is made.

Thanking you

Vinod