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Capital gains tax for property sale

Subrato (vp - ops) (30 Points)

18 December 2014

I booked a flat in Mumbai in Oct 2009 and have been paying (a total of Rs1.45 cr ) for it on an Instalment basis due on per slab on completion. To date I have paid more than 90% of the value quoted by the builder. The project has got delayed and I am yet to receive possession for this property and pay a balance of 10 lacs outstanding which is due upon possession. However, I have already gotten this property registered in my name in June 2013. I have another property in Gurgaon which I want to sell for about RS 1.90 cr within the next 6 months and offset most of the Capital Gains against the purchase of the above property in Mumbai for which I'm yet to receive possession. Is this permissible and within the laws of Capital Gains?

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5 Replies

Nishant Singla (Chartered Accountant in Practice) (71 Points)
Replied 18 December 2014

Dear Subrato As per sec 54 you should Purchase residential house before one year of transfer. But one year has expired in June 2014, so you can't calim exemption u/s 54. You have to do new investment.

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Subrato (vp - ops) (30 Points)
Replied 19 December 2014

Nishant thanks for your response. What you have stated is just the rule and not its interpretation. Since the new property being bought in Mumbai (against the intended sale of my old Gurgaon flat) is still not habitable (neither have I been given its possession and not have I fully paid for it), the IT law must consider it as offsetting for purpose of Capital Gains against the sale proceeds. Let me know if my understanding is correct.

Mihir (Wealth Manager) (5293 Points)
Replied 19 December 2014

If you sell the Gurgaon property before the end of march 2015, you should be able to claim exemption u/s 54 as the registry of mumbai flat is done in the FY 2013-14, which is a year before the FY 2014-15.

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CA DEEPAK ARORA (EMPLOYEE) (49 Points)
Replied 23 December 2014

New House should be purchased one year before or within two year from the date of transfer of old house to claim deduction u/s 54.

so if you take possession and last installment before within two year from date of transfer of old house, since you have not yet sold ur guraon property, there is no question of capital gain yet.

Subrato (vp - ops) (30 Points)
Replied 24 December 2014

Thanks Deepak. Since I will pay the last installment of the new house in Mumbai and take possession by June 2015, can I sell the Gurgaon flat till 31 March 2015 and offset my Capital Gains Tax?