Ltcg on sale of of under construction flat

Tax queries 955 views 7 replies

Deepak Jindal

Partner

55 Points Posted on 30 July 2013

Please help on folowing issue

I had sold a underconstruction flat located in delhi before getting possesion. the payment for same was construction linked hence full payment was not made by me till date of sale. but the allotment letter is of full price. Now as i had sold the same I need clarification on the issues as under

1.) Though I have some clarity regarding date of indexation to be reckoned bac to date of allotment making my gain to be LTCG. but can anybody quote any case law for the same.

2.) As its a ltcg what will be the cost of acquisition , the allotment price or th price paid till date of sale

if we take amount paid as cost of acquisition it would have been possible for me to take advance from buyer and pay the full amount to the builder to increase my cost of acquisiton.Further teh same would have been possible by taking loan from bank and paying builder in full. So to me i think the cost of allotment is my cost not the actual payment made but have no clarity. Please help on the issue I need to file the rerun.

Thanksin advance

Deepak Jindal

Replies (7)

Mihir

Wealth Manager

5293 Points Posted on 30 July 2013

Cost of acquisition will be the allotment price plus the other construction linked payment made to acquiring the property. Payments other than allotment price is also payment / expenses incurred toward acquiring the property, hence it will be part of cost of acquisition. Since the flat has been sold even before possessing the flat, the allotment letter date shall be the year of indexation for cost of acquisition. But as the flat is still under-construction and construction linked payment is pending, you will have to enter into a tripartite agreement , you, the buyer and the builder.

Deepak Jindal

Partner

55 Points Posted on 30 July 2013

Thanks Mihir

Please advise the full allotment price has not yet been paid as two installments are pending so we have to tka elallotment price as cost only.

Further can you support any case law for the same

Mihir

Wealth Manager

5293 Points Posted on 30 July 2013

Yes, whatever has been actually paid, will become cost of acquisition. Of course, not paying the full price will affect the sale consideration. I don't have a caselaw, but you can search in google with "under-construction sale LTCG" I think you can get similar cases, if not exact, over the internet.