• Query on transfer of flat, TDS for transfer of flat, LTCG

Hi,

A had purchased a flat 4 years ago from builder (B) directly for Rs. X (<50L. no TDS was paid) and sale agreement is made for Rs. X, The flat is ready now, but A wants to transfer the flat to a new buyer (C) for Rs. Y (>50L) before the registration. There is a transfer charges mentioned in the agreement which A will pay to B as per agreement. 

1. Builder would register the flat for Rs. X as per the sale agreement value. In the Assignment deed builder says he would quote only Rs. X. Buyer bank (D) insist on quoting full consideration of Rs. Y for loan sanction on Y. And suggested builder can mention that it was sold to A for Rs. X and C is buying from A for Rs. Y as price has increased in last 4 years. Builder is hesitant to put new price in assignment deed as he fears there might be accounts problem later. Is the bank suggestion correct? If not, what is the right way and type of documentation so new buyer gets loan on new price?

2. A has not paid 1% TDS as Rs. X was < 50L. Now with the new price Y > 50L, Will the new buyer pay 1% TDS to A's account?

3. Instead of going through transfer with builder, If A registers the flat, and then sell to C immediately, will it still be considered LTCG as the date of sale agreement was 4 years back or will it be STCG as the sale deed registration is now? There are lots of conflicting articles on this, saying the registration date should be considered after registration... so any help on right date would be helpful.


Any help would be greatly appreciated, and thanks a lot in advance!

Thanks!
Asked 7 years ago in Property Law
Religion: Hindu

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5 Answers

1) since sale price has increased in last 4 years the current market price should be mentioned in agreement . bank approach is correct

2) since price is more than Rs 50 lakhs TDS of 1% has to be deducted by the buyer before making payment to the seller

3) 1% TDS has to be deposited with the tax department using Form 26QB.

4)if the purchaser did not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, he may have to pay a penalty of up to Rs 1 lakh.

5) it is better A take possession of the flat from the builder by regd sale deed then sells the flat later to purchaser

6) it would attract LTCG as date of agreement will be considered as the date of purchase as it gave you a right in the flat on the date of agreement itself.

Ajay Sethi
Advocate, Mumbai
95208 Answers
7610 Consultations

5.0 on 5.0

1)the reason why i advised you to register sale deed and then sell the flat is builders charge exorbitant amount in lakhs for transfer of flat

2) whereas once possession of flat is taken by you and cooperative society formed of members transfer charges are minimal . for instance in Maharashtra society cannot charge more than Rs 25000 as transfer charges

3)original agreement for sale , transfer deed would comprise valid documentation for calculating LTCG

Ajay Sethi
Advocate, Mumbai
95208 Answers
7610 Consultations

5.0 on 5.0

1. Any profit or gain arising from the transfer of a capital asset during a previous year is chargeable to tax under the head ‘Capital gain'. Transfer in relation to a capital asset includes sale, exchange or relinquishment of the asset or the extinguishment of any rights or compulsory acquisition under any law. You have sold/relinquished your rights in the flat under construction.

In this case the original buyer is transferring his rights in the property to the prospective buyer though the builder is just a party as a vendor to sell the property to the prospective buyer by executing a sale deed a registered sale deed.

Now A has capital gains, so he has to pay the tax for that, since the payment is made by the bank loan the bank will insist on the new sale consideration amount only in the registered document, for this a tripartite agreement will bring a proper solution.

2. TDS for purchase value more than Rs. 50 Lakhs has to be paid now if the sale consideration price is above the limit.

3. It can be construed that immediately upon registration of sale agreement the buyer acquires right in the property and he can even sue the defaulter builder before the court on the basis of his rights, therefore it would be proper to mention that the sale of property by A to C would attract LTCG and he may plan to claim exemption as per prevailing provision of law on that.

T Kalaiselvan
Advocate, Vellore
85409 Answers
2237 Consultations

5.0 on 5.0

Since the registration of sale agreement already suffered the requisite stamp duty, for registration of sale deed the balance applicable stamp duty may only have to be paid. The transfer charges now paid may e collected form the prospective buyer while you are transferring the same to him.

The original sale agreement if a registered document, shall be an evidence for computing the LTCG.

T Kalaiselvan
Advocate, Vellore
85409 Answers
2237 Consultations

5.0 on 5.0

1. What the bank is saying is correct. The prevailing market price alone should be incorporated in the agreement.

2. TDS @ 1% will have to be deducted by the buyer if the sale consideration is more than 50 lakhs and then remitted to the IT dept.

3. The sale of property by A to C will attract LTCG. A should first get the sale deed executed in his favour and then only transfer the title to a subsequent buyer.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

5.0 on 5.0

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