Long term capital gain tax - exemption

Tax queries 1816 views 3 replies

Subhankar Ghosh

Finance Manager

34 Points Joined October 2011

Hi,

I would like to know about the the scope of exemption from payment of LTCG tax under following circumstance:

I am an NRI. I have sold one flat in Sep 2011 which I purchased in Aug 2004. As per the computations considering Indexed Cost of Acquisition there has been a LTCG of Rs.515,000 (before deducting brokerage Rs.50,000 paid in cash for selling the flat) from sale of my old flat.

I have purchased a new flat, particulars of which are as below:

Agreement to sale signed (between self and promoter) when the flat was under construction : 01.10.2008

Date of possession of new flat : 11.11.2010

Date of Sale of old flat : 20.09.2011

Date of registration (signing of deed of conveyance) of new flat : 25.09.11

I have paid brokerage of Rs.50,000 for selling the old flat, paid registration and stamp duty charges for New Flat Rs. 475,000 from the sale proceeds of old flat.

While going through some of the related case laws I found the following:

"Date of taking possessions relevant for computing time-limit - Date of taking over possession of property purchased, and not the date of registration of sale in favour of the assessee, is relevant for computing the prescribed time-limit - CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397 (AP)."

Since my date of possesion of new flat is within one year prior to sale of the old flat pls let me know whether I have to pay LTCG tax of approx Rs.105,575 for F.Y. 2011-12 (A.Y 2012-13) as per computation I made considering tax rate of 20% and Education Cess 3% thereon.

Subhankar Ghosh

U.A.E.

Replies (3)

Rohit

ENGR

21 Points Joined March 2012

Sir,

I want to know the tax implication in my case. I had an old property(a flat) purchased in 1990 by me. I am going to sell it. So the benifit derived from it will be adjusted to pay a home loan prepayment, which were drawn by me before 3 years.

Please give me a detailed guidance in the matter.

CA Vishal kapoor

Partner

320 Points Joined August 2008

Dear Mr Subhankar Ghosh,

You need not to pay any Long term Capital Gain because the flat purchased by you is within the time limit of Sec 54(i.e 1 year before or 2 years after the date of transfer) & you are eligible for the deduction u/ s 54 subject to that new flat is not transfer with in a period of next 3 Years. I agree with you that in Income Tax Act registration is not the only measure for the chargability of Income Tax. You may also refer the below case.

In Mrs. Shahzada Begum’s case [1988] 173 ITR 397 the Andhra Pradesh High Court has taken the view that the expression "purchased" would undoubtedly connote the domain and control of the property given into the assessee’s hands. Therefore, registration is not necessary. If money is paid and possession has been taken within the stipulated period under section 54(1), the assessee is entitled to benefit under section 54(1)

Thanks