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Capital Gains exemption doubt

Tax planning 310 views 4 replies

nitin

partner

78 Points Joined July 2012

Hello

I had invested the capital gains in a under construction property in March 2022 to claim exemption from paying ltcg. the property is ready but occupation certificate is still unavailable as the road and sewer works are not complete from government side. Hence unable to go for registration before the end of 3 year period. I don't have any documents except the payment receipt. If I enter into a sale agreement with the builder will this document be sufficient as a proof ? And is it mandatory to register the sale agreement ?

Kindly clarify. Thanks.

Replies (4)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9016 Points Joined December 2011

To claim exemption from Long-Term Capital Gains (LTCG) under Section 54 of the Income Tax Act, you need to invest the capital gains in a residential property.

Since the property is ready, but the occupation certificate is delayed due to external factors, you're exploring alternative documentation to support your exemption claim.

Sale Agreement as Proof A sale agreement with the builder can serve as a proof of investment, but it's essential to ensure the agreement includes the following:

1. *Property details*: Clearly mention the property's descripttion, location, and other identifying features.

2. *Investment amount*: Specify the amount invested, which should match the capital gains amount.

3. *Payment receipts*: Attach the payment receipts to the sale agreement.

4. *Builder's obligations*: Include the builder's commitments to complete the project, obtain necessary certifications (like the occupation certificate), and hand over the property. Registration of Sale Agreement While it's not mandatory to register the sale agreement, having a registered document can provide additional authenticity. In your case, since you don't have any other documents, registering the sale agreement might be beneficial.

However, check the local laws and regulations regarding registration of sale agreements in your area. Some states may have specific requirements or exemptions. Supporting Documents To further support your exemption claim, consider collecting additional documents:

1. *Builder's certificate*: Obtain a certificate from the builder confirming the investment, property details, and expected completion date.

2. *Payment receipts*: Collect receipts for all payments made towards the property.

3. *Photographs and videos*: Document the property's current state, including any incomplete work (like roads and sewers). Consult a Tax Professional It's highly recommended that you consult a tax professional or chartered accountant to review your specific situation and provide personalized guidance.

They can help you navigate the exemption claim process and ensure you're meeting all the necessary requirements.

Rama chary Rachakonda

Master in Accounts & high court Advocate

9016 Points Joined December 2011

To claim exemption from Long-Term Capital Gains (LTCG) under Section 54 of the Income Tax Act, you need to invest the capital gains in a residential property.

Since the property is ready, but the occupation certificate is delayed due to external factors, you're exploring alternative documentation to support your exemption claim.

Sale Agreement as Proof A sale agreement with the builder can serve as a proof of investment, but it's essential to ensure the agreement includes the following:

1. *Property details*: Clearly mention the property's descripttion, location, and other identifying features.

2. *Investment amount*: Specify the amount invested, which should match the capital gains amount.

3. *Payment receipts*: Attach the payment receipts to the sale agreement.

4. *Builder's obligations*: Include the builder's commitments to complete the project, obtain necessary certifications (like the occupation certificate), and hand over the property. Registration of Sale Agreement While it's not mandatory to register the sale agreement, having a registered document can provide additional authenticity. In your case, since you don't have any other documents, registering the sale agreement might be beneficial.

However, check the local laws and regulations regarding registration of sale agreements in your area. Some states may have specific requirements or exemptions. Supporting Documents To further support your exemption claim, consider collecting additional documents:

1. *Builder's certificate*: Obtain a certificate from the builder confirming the investment, property details, and expected completion date.

2. *Payment receipts*: Collect receipts for all payments made towards the property.

3. *Photographs and videos*: Document the property's current state, including any incomplete work (like roads and sewers). Consult a Tax Professional It's highly recommended that you consult a tax professional or chartered accountant to review your specific situation and provide personalized guidance.

They can help you navigate the exemption claim process and ensure you're meeting all the necessary requirements.

nitin

partner

78 Points Joined July 2012

Thank you for your guidance

nitin

partner

78 Points Joined July 2012

Hello everyone,

With regards to my above query, the builder is ready to provide sale agreement with notary and he says that's sufficient as a legal document to claim capital gains tax exemption. Is there any difference between notarised document and registered documents? Kindly enlighten me. Thanks in advance.

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