LTCG investment in under-construction flat

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Senthil Ganapathy

Project Managar

29 Points Posted on 07 June 2011

Hi,

I bought a residential property in March 2005 for 8.6 lakhs and paid stamp duty of 75,000 for it. I sold the same property in June 2010 for 24 lakhs.

I have done the LTCG calculation as below:

Cost of aquisition with indexation= 860000+75000=935000*(711/480)=1384969

LTCG = 2400000-1384969 = 1015031 (Please correct me if the calculation is incorrect)

Though I have paid brokerage and done some improvements to the property, I am not including it in the LTCG calculation as I dont have receipts/proofs for them.

I am planning to buy an underconstruction property/flat that will be completed by Dec 2012 and will be paying an advance of about 10 lakhs to the builder in June 2011.

I have the following queries:

1. As I am paying an advance that is equal to the LTCG to the builder in June2011, will it offset the LTCG or is it mandatory to deposit the LTCG to the capital gain savings account? I understand that the deposit of the LTCG should be done in the savings account before filing the income tax returns, is the same applicable to utlising the LTCG for the new flat?

2. The flat will be ready only in Dec 2012, which is more than 2 years from the date of sale. Will this be considered as a construction of a new house and is 3 years from the date of sale is applicable here

3. The property sold was only in my name but the new flat will be registered jointly in my name and my wife who is a house wife. Will I still get LTCG exemption.

4. How to show this in the income tax returns filing and which form to be used for this purpose.

Thanks in advance,

Senthil Ganapathy

Replies (5)

CA AMANPREET SINGH

Chartered Accountant

284 Points Posted on 07 June 2011

you will get exemption of 10 Lakhs by paying advance

it will be treated as Construction of property

it must be completed wihin 2 Years otherwise Exemption will be withdrawn

Form for return is ITR-2 if u dont have business income

Paras

Mcom CA Final

122 Points Posted on 07 June 2011

Cannot be considered as construction .

if u are buying from builder it will be purchasing of flat (within 2 years).

Senthil Ganapathy

Project Managar

29 Points Posted on 08 June 2011

Thanks for the response.

Please clarify if it is 2 years or 3 Years from the date of sale. I have read in some other thread that undercontruction flat can be bought and registered within 3 years from the date of sale of the residential house and income tax on LTCG can be avoided.

Another point is that the Builder is making two agreements for the flat 1. Agreement to sell for the undivided share of land and 2. Construction agreement to build a flat in the UDS of land.

Thanks and Regards,

Senthil Ganapathy