One of our client had bought a Flat in the year 2005-06 the construction is still not complete and for which he had taken a loan and had being paying interest on the same.
Now in feb 2010 he has transfered the right in the property will that pre-EMI interest what he has paid be allowed as part of indexed cost or what is the treatment for the same??
will the maintenance charges paid for a flat be allowed as deduction from the sale value???
Only cost of improvement is allowable as a deduction with a weightage for inflation by way of indexation. What is the improvement he has made to the property by paying interest and principal on the property? Same goes for maintainance charges.
In short, any amount spent to increase the physical worth of the property (read civil works) will qualify for indexation as cost of improvement. Otherwise, the expenses incurred must be incidental to transfer of the property like brokerage, registration and stamp duty charge etc. All else are ruled out.
wil the loan availed for the purpose of purchase be considered as improvement ?? i dont think so!!
You are right, it doesn't. Any self created charge is not allowable as an expense from LTCG.
CA Suraj Garg & Associates
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