Property sale query

Tax queries 173 views 4 replies

V Sridhar

Project Manager

21 Points Joined July 2017

Hello,

I would like to know if below situation leads to a long term capital gain or short term capital gain?

Purchased 300 Sq. Yds land in July 2010 for 34 Lakhs (Hyderabad)
Signed a Development agreement with a builder in Feb 2013. Builder to construct 10 flats in 600 Sq. Yd land (including 300 Sq. Yds. from others).
Building completion notice acquired from local municipal body in Dec 2016
My share of built up area is about 3200 Sqft, at an approx rate of Rs. 2,000 per SqFt
sold 1 flat in Mar 2017 for 27.54 Lakhs and second one in August 2017 for the same price
As the property is developed by business, not by me - do we consider development cost for tax calculation?

From an individual perspective, I have invested in 2010 and sold in 2017, though construction completed in 2016 by the builder. Should I be paying long term gains or short term capital gain? thank you for looking in to this.

Replies (4)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210518 Points Joined July 2016

"Signed a Development agreement with a builder in Feb 2013.........."

Whether short term capital gain paid in AY 2013-14?

Archit Goel

Student

96 Points Joined August 2014

There will be two incidents of Capital gains

(i) In A/Y 2017-18, there will be long term capital gain. Period of holding from july 2010 to dec 2016. In which sale consideration will be stamp duty of the share you have received after construction. Cost of acquisition will be purchase price of 34 lacs subject to indexation.

(ii) (a) In A/Y 2017-18, there will be short term capital gain on sale of part of your share. Sale consideration will be 27.54 lacs subject to Section 50C. Cost of acquisition will stamp duty value on dec 2016 of part sold.

(b) In A/Y 2018-19, there will be short term capital gain on sale of part of your share. Sale consideration will be 27.54 lacs subject to Section 50C. Cost of acquisition will stamp duty value on dec 2016 of part sold.

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

I believe that since the development agreement is being signed in Feb 13 so period of holding would be from Feb 2013 onwards. because as per court rulings the right in the property wud be acquired from the date of signing the development agreement. how would short term capital gains arise in this case

Archit Goel

Student

96 Points Joined August 2014

Finance Act 2017 introduced a new section 45(5A) for joint development agreements and 49(7) for its Cost of acquisition. It specifies that period of holding of asses under JDA will be from date of acquisition to the date on which certificate of completion is received. Which implies that if that asset is further sold then the period of holding is from the date of certificate of completion till the date of sale