Regarding LTCG on property where payment is construction linked

Tax queries 365 views 2 replies

Rajiv Gupta

manager

63 Points Joined May 2016

Dear Sir/Madam,

I have query regarding LTCG calculation on property where payment is made to builder as per consruction. I booked a property in 2009 and paid Rs 4.3 L. In 2010, I got allotment letter and then payments were made as per schedule. I got possession in 2018.

Conveyance deed was executed in 2024. Now, I have sold this property in Jun'25 and registry will happen in Jul 2025. Few queries:

a) How LTCG will be calculated considering indexation. Will 4.3L will be indexed as per 2009 and remaining amount as per index in 2010 as I got allotment in 2010? OR It will be indexed as per 2018 where I got possession.

b) Allotment in 2010, possession in 2018 and conveyance in 2024 and sold in 2025. It will be LTCG or STCG?

c) Any other point i need to take care if I can open CGAS for depositing CG?

Please help to answer.

Regards,

Rajiv Gupta

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

a) Indexation for LTCG Calculation In cases where property is acquired through a builder under a construction-linked plan, the date of allotment is generally considered the date of acquisition for capital gains purposes. So: The initial payment of ₹4.3L in 2009 would be indexed using the Cost Inflation Index (CII) of 2009–10. The subsequent payments made as per the construction schedule would be indexed based on the respective years in which they were paid. This method is supported by tax experts and precedents where courts have held that the allotment date marks the start of ownership, even if possession or registration happens later.

b) LTCG or STCG? Since the allotment was in 2010 and the sale is in 2025, the holding period is well over 24 months. Therefore, this qualifies as a Long-Term Capital Gain (LTCG). The dates of possession (2018) and conveyance (2024) do not affect the holding period for tax purposes in this context.

c) Capital Gains Account Scheme (CGAS) Yes, you can open a Capital Gains Account under the CGAS, 1988 if you're unable to reinvest the capital gains before the due date of filing your income tax return (typically July 31st for individuals). This allows you to claim exemption under Section 54 (if reinvesting in another residential property) or other relevant sections.

There are two types of CGAS accounts: Type A: Savings account (flexible withdrawals) Type B: Term deposit (fixed tenure) You can open these accounts at designated banks like SBI, Bank of Baroda, etc., by submitting Form A along with your PAN and address proof.

Rajiv Gupta

manager

63 Points Joined May 2016

Thank You Sir. One of the CA suggested that date of allotment will be considered for all payments done in subsequent years. In case allotment letter in given in 2010 and payments made after that, will all be considered for indexation consindering 2010. Its contradiciting what you have suggested where payment date year need to be considered for indexation purposes.

Regards,

Rajiv