Tax liability query for resale of an underconstruction flat

Tax queries 1321 views 5 replies

ruskin

ABC

24 Points Joined May 2014

How to calculate income tax liability on the resale of an under construction property? e.g. I did an agreement with builder to purchase a property of Total cost = Rs 1 lakh and took a home loan to finance the same.

After 2 years, I entered into an agreement with a buyer to sell the property at Rs 1.5 lakhs while the property is still under construction. How much will be the capital gains here and overall tax liability?

Can I also account for the deduction of Pre-eMI iNterest paid to bank during this period from the short term capital gain amount?

Pls share the options to minimise the capital gains tax liability in this case.

Replies (5)

Mihir

Wealth Manager

5293 Points Joined December 2008

If you sale this under-construction flat before the end of 3 years, it will attract short term capital gain and will be taxed at 15%. But if you sale after 3 years, then long term capital gain will arise wherein you are eligible to claim exemption to save tax.

Arpit Pachisia

734 Points Joined July 2012

Hello Ruskin,

As you sale the underconstructured house in 2 years, so you will be taxed @ 15% STT paid on the net profit of Rs.50,000.i.e. Rs 7,500 (taxable amount).

No, interest paid on home loan to bank will not be allowable as deduction from STCG.

Else second option, this 50,000 will add to your total income and if it does't exceeds Rs 2,00,000+ rebate as slab suggests than you will not have to pay any tax.

Thanking You

Niral Gangar

Management Consulting Investment Adviso

100 Points Joined February 2008

I agree regarding it being Short term capital gains of Rs. 50000/-. But the taxation shall be as per slab rates and not flat 15%. Flat 15% rate is applicable only for STT paid transactions. You cannot deduct Pre EMI interest. But you can claim exps incidental to transfer, eg. lawyer fees, brokerage, etc. For STCG you cannot minimise your tax liability by any other mode

Sidharth

student

25 Points Joined November 2013

STCG of 50,000 taxable at 15%.

Sahil Bhatia

Practicing Chartered Accountant

290 Points Joined July 2009

I agree with niral's view but It will be taxable as per applicable slab rate and not @ 15% as this doesnt fall u/s 111A of IT act Taxability-STCG: STCG is taxed at normal tax rates. However, STCG arising from such equity shares or units, which are subject to securities transaction tax (STT) shall be taxes at concessional rate of 15% u/s 111A.