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Trf of tenancy rights

Tax queries 646 views 4 replies

Mihir

Wealth Manager

5293 Points Posted on 14 April 2014

An individual wishes to transfer his tenancy rights in a residential property in favor of a builder. Tenancy rights is a capital asset and shall attract capital gains.

1) How does one arrive at a cost of acquisition to compute long term capital gains? Tenancy rights acquired before 1981.

2) Does one need to prepare a transfer deed duly stamped and registered or a mere MoU will be sufficient? Builder wants to make an MoU only.

3) Is section 54 and/or 54EC available exemption in this case?

Thanks

Replies (4)

Z

Tax Consultation (US and India)

2970 Points Posted on 14 April 2014

If payment was made to acquire such rights then we shall take that cost lest its value is considered as nil (s55) (3) S 54F & s 54EC can be availed as they apply in case of transfer of long term capital asset(for 54f transfer should be of other than house property) (2) deed would be better if exemption is to be availed.

JAINENDRA JAIN

ACS/CA

1668 Points Posted on 14 April 2014

coa for inangible assests such as tenancy rights shall be taken as nil.

benefit under sec 54 will continue.

Mihir

Wealth Manager

5293 Points Posted on 15 April 2014

Thanks for the replies. The builder is unwilling to prepare a transfer deed. He only wants to prepare a MoU and finalise the deal. What could go wrong in future if MoU is prepared instead of transfer deed?

Thanks

Z

Tax Consultation (US and India)

2970 Points Posted on 15 April 2014

Its just that those docs which are required to be stamped but are not stamped, becomes unenforceable in law hence if builder does not fulfill his promise then you cant go to court but still since other conditions of contract act (I think s 10) are met it is still a binding & valid agreement,though not enforceable. If builder is reliable then you may.