Hi, I have bought an under construction property. I have been paying to the builder since lasst 7 years in installments. However, now I would be selling this property without registration and of course without occupation to someone else. The property will be ready in other 6 months.
My question is:
How do I calculate the LTCG on this? As I said I have been paying to the builder since 2011-12 and the last disbursement was in 2017-18. The new buyer is required to my last 2 installments.
So I actually have both LTCG for the disbursements made before last 3 years and few short term gain for the disbursements made after the last 3 years. So should I first calculate the LTCG with indexation and then the short term capital gain. In both the cases I will have to calculate for each disbursement to the builder as the timeline is spread over.
Can you please help me verify if this is the right thing to do? Appreciate it so much.
Thank you,
Pradeep
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Tax on property sale (under construction)
Replies (1)
Long Term Capital asset is an capital asset held more than 36 months immediately before the date sale or transfer.
Capital Asset in your case is the Right in the property arising in terms of agreement entered between you and builder.
Whatever you are selling(I.e. transferring) is the right in the property.
Period of holding of the right to be reckoned from the date of entering into contract.
As explained by you that you are paying instalment since last 7 years. Therefore, I can conclude that the Capital asset being right in under construction property is a long term capital asset.
Payment made in instalment can be taken as cost of improvement of the right in your case.
Capital Asset in your case is the Right in the property arising in terms of agreement entered between you and builder.
Whatever you are selling(I.e. transferring) is the right in the property.
Period of holding of the right to be reckoned from the date of entering into contract.
As explained by you that you are paying instalment since last 7 years. Therefore, I can conclude that the Capital asset being right in under construction property is a long term capital asset.
Payment made in instalment can be taken as cost of improvement of the right in your case.
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