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Tax - sale of under construction property after possesion

Tax queries 721 views 5 replies

I have a question on tax treatment of capital gain arising from sale of under construction property immediately after getting possession.

Assuming below details

1. Date of paying earnest money to builder: 1-May-2011

2. Date of registering agreement to sale: 15-May-2011. Nearly 95% of funds collected by the builder by April 2013. 

3. Date of getting possession letter: 30-Jun-14

Now, if one chooses to sell the property now, will the resulting capital gain be treated as long term capital gain or short term capital gain? Can such gain be tax exempt if the proceeds are used to buy another property? 

How will the capital gain be calculated? 

Replies (5)

Date of purchase of the asset will be April 2014 when all the consideration paid and you got the possession so date of acquisition will be April 2014 and the Capital gian will be calculated will be short term capital gain as for long term capital gain asset should be held for more than 3 years so in your case slab rate will be applicable.

 

Thanks for your reply.

So date of getting possession and paying final payment (i.e June 2014) matters and not the day when I registered the property (i.e May 2011?). Technically I became the owner in May 2011 when it was registered in my name and I am holding it since then.. isn't it? Doesn't law/ tax look at it that way? 

 

 

Law says when you get key of the premisses or total consideration paid and registration done which ever is earlier. But in your case i think registration was get done in 2014 as earlier neither whole consideration was paid nor you got the key of the premises.

 

 

Registration was done in 2011 - I paid stamp duty then. But after registration I made slab wise payments till April 2013 (when 97% payment was made). In June 2014 I made full and final payment, got possession and keys to the flat. As you said, whichever is earlier - then should date of registration be considered for calculating holding period?

 

 

 

 

@ Snehal according to me date of purchase will be considered from the date of registration of property i.e. date of sale agreement and not the date of last payment so in ur case date of purchase will be 15.05.2011


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