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Treatment of Capital Gain Tax when spread over 2 financial years

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Sheikh Zubair

Project Engineer

30 Points Posted on 16 July 2023

Hi.

I had agreed to sell a piece of land that i had held for more than 3 years in FY 22-23. I received around 70% of the payment before march 31 and some of the payment is still due which would be made during current FY. I want to know how to to file the return for previous FY with regard to the 70% payment that i had received. The ownership of the land is yet to be transferred.

Replies (4)

Quick Summary

This discussion clarifies the treatment of Capital Gains Tax when a land sale payment is split across two financial years. Generally, the entire gain is taxed in the year the sale is completed, not when partial payments are received. If the sale agreement isn't registered or possession isn't transferred within the financial year, payments received are often treated as an advance, with the full tax liability arising in the year the transfer is finalised.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121543 Points Posted on 16 July 2023

If the agreement is not registered or possession is not given in FY 2022-23, in that case 70% amount is been treated as advance in the year. You cannot sale land in two parts. Your deal will be considered for FY 2023-24 when the transfer of WHOLE land will get completed.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 16 July 2023

In addition to above I would like to add , For Calculation of Capital Gain date and year of transfer is important or required .

sabyasachi mukherjee

Profession

19978 Points Posted on 19 July 2023

Capital gain tax cannot be a deferred revenue expenditure.

Aashok Kumar Sharma

Finance/Compliance Consultant

75642 Points Posted on 08 November 2026

Advance received across years, land sale completed later:

• Capital gain arises in the year of "transfer" (registration, or possession under part performance of a registered agreement, Sec 2(47)(v)). Advances received in earlier years aren't taxed then. They're part of the sale consideration in the year of transfer.

• If the agreement was signed in FY 2022-23 with advance, and registration was in FY 2023-24, the gain is in FY 2023-24 (unless possession was given earlier).

• If the land was held more than 24 months at transfer, LTCG. For transfers before 23 July 2024: 20% with indexation.

• If the deal was cancelled and the advance forfeited, Sec 56(2)(ix).