Sale of under construction flat and re-investment in new

Tax queries 985 views 2 replies

Sal

53 Points Joined July 2011

Hello Experts,

There are quite a few posts but I am unable to find an answer. I purchased an under-construction apartmnet in Dec, 2010. The cost was ~30 lacs. Builder buyer agreement and allotment letter were created at the same time i.e. Dec, 2010. The payment was done in various installments, I have not yet taken the possession of the apartment as it is not yet complete.

I have sold the apartment last week (May 2015) at around ~50 lacs. I understand that Long Term Capital gain taxes will apply here.

I have 3 questions:

a.) Would all the installments that I have paid to builder come under LTCG or does it depend on the date of installment ?

b.) Can I deduct brokerage and builder-transfer fees from the capital gain ?

c.) I booked another apartment in 2013 and I have taken ~60 lacs home loan against that. Can I adjust my LTCG u/s 54/54F by paying back the home loan ?

Thanks in anticipation for your replies !

Replies (2)

Gagan Deep Singh

CHARTERED ACCOUNTANT

1190 Points Joined October 2012

1. All the installments you have paid would come under LTCG since date of acquisition would be considered date of allotment letter as per Punjab & Haryana High Court decision in case of Vinod Kumar Jain v,. CIT.

But you have mentioned that apartment was not yet completed, then P&H decision in case of Ashok Syal v CIT may apply where it was held that mere construction of room without amenities like boundary wall, kitchen, toilet electricity, water and sewerage connection etc. cannot be held to be house and hence benefit of section 54 cannot be granted.

2. Brokerage and building transfer fees would be deductible as it was exclusively incurred in connection with transfer.

3. No you cannot adjust LTCG by paying back the home loan because u/s 54/54F assessee should have purchased a residential house one year before the date of transfer and moreover exemption is not available for paying back the home loan. However, you may claim exemption to the extent of Rs 50 lac u/s 54EC by investing in REC/NHAI bonds within 6 months from the date of transfer and you have to hold these bonds for next three years from the date of acquisition.

Sal

53 Points Joined July 2011

Gagan ji, thanks for your reply. Regarding 1.) i.e. under construction flat, the following links suggest that LTCG is applicable for under construction apartments-

https://www.managemytax.in/clients/knowledgebase.php?action=displayarticle&id=642

https://www.business-standard.com/article/pf/date-of-allotment-is-key-in-under-construction-flat-114040500821_1.H T M L

Are there some details that I am missing here ?