LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Capital gains tax and exemption u/s 54

Financepie (other) (70 Points)

26 August 2021

My client has sold residential flat on 30/12/1998 for a consideration of Rs.23,46,000. He undertook renovation of the said flat in 2010 and incurred an expense of Rs.23,00,000. He sold the flat on 01/08/2021 for a consideration of Rs.2,30,00,000. What would be the estimated capital gains on this transaction.

He purchased another residential flat in 2016. This property is still under construction till date. Can he claim exemption u/s 54 for this flat under construction ?

Reply
Follow
Share

4 Replies

JGM (Knowledge Sharer) (443 Points)
Replied 02 September 2021

Has he sold the property in 1998 or acquired the property?

On capital gains computation, cost of acquisition including cost of improvement is permissible deduction. If the period of holding is more than 2 years, you can claim the benefit of indexation. The gain so arrived at will be treated as long term capital gains and accordingly taxed at 20%.

In absence of date of purchase of under construction flat, I cannot comment whether exemption under section 54 is available or not

Financepie (other) (70 Points)
Replied 02 September 2021

Sorry, date of purchase is 30/12/1998.

1 Like

JGM (Knowledge Sharer) (443 Points)
Replied 02 September 2021

Considering that the property is purchased in 1998, the gain will be long term capital gain. Accordingly, benefit of indexation should be available (presuming the seller is a resident). For claiming benefit of exemption under section 54, one need to analyse the reason for the property still being under consideration (esp considering that it is 5 years since the booking of the flat), status of construction, amount paid etc. it could be contentious to claim exemption under section 54 in the current set of facts. One will need to carry out detailed analysis of section 54

Financepie (other) (70 Points)
Replied 02 September 2021

The property is still under construction because of delays on the part of the builder...the residents have filed case in RERA and have got the builder to restart the construction.