Go AD-Free with CAclubindia PRO for Rs 167/Month Only. Subscribe Now!

Capital gain - tdr

Tax queries 716 views 1 replies

Mihir

Wealth Manager

5293 Points Joined December 2008

A housing society goes for a redevelopment with a builder. The agreement states that the flat owner shall be given "x" sq feet more than the existing flat, in the new building in the nearby locality. The transfer charges like stamp duty, registration etc are borne by the builder.

What are the tax implications for this flat owner ? The valuation of the flat will go up because its a new building and a bigger flat. Any capital gain arises in such a transfer from redevelopment?

What if the flat owner sells this new flat? What will be the indexation of this new flat (old flat purchase year or the new flat purchase year)?

Thanks

Replies (1)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

For a transaction to attract Capital gain, there shud be an element of transfer. In this case the flat holder has not transferred the property & the same remains in hte possession after he starts living in the reconstructed flat.

Yes there will be capital gain in such case if he sells the flat he would receive good consideration for his flat as the value will go up. but the cost of acquisiton will remain the same when he initially purchased the flat. So indexation will be taken for the year in whihc he had initially purchased the flat.