I became a member of housing society in 2009 for a house. To fund the construction, I sold my plot in 2009-10 with capital gain of 21 lakhs without indexation. However, since requisite clearances were not available, the entire amount was deposited in capital gain account. Since construction could not start even by end of FY 2011-12, I invested the proceeds plus four lakhs savings for partial down payment for booking a flat from reputed developer in March 11-12. Construction is yet to start by developer. Meanwhile, the housing society clearances have been received in December 13 and construction has started. Now to fund this construction I plan to dispose of the flat booked with the developer which is expected to be disposed off for Rs. 30 lakhs. How the capital gain has to be treated for tax purposes? i.e. original CG of 21 lakhs and expected new CG of 5 lakh (less than 3 years). What if the builder flat is disposed off in April 2014?
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Replies (2)
Your case will make any AO curious. You could have consulted a CA.
1) Capital gain will arise when you sold the plot for 21 lacs. You said it is short term CG which means exemption is unavailable. And you are required to pay tax as per the applicable tax slab rate.
2) Capital gain will arise again when you sold the under-construction flat which was booked in March 2012. Even here, it is short term CG wherein the gain shall be taxable as per applicable tax slab rate.
Dear Mihir,
I think my query requires more clarity. The plot I sold was another property purchased in 1996, meaning Rs. 21.00 lakh is LTCG.
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