• LTCG calculation for transfer of property before registration

In the case where A has entered in to sale and construction agreement with builder B for purchase of apartment. A made payments to B as per schedule in years 2011, 2012, 2013, 2014 and 2015. A decided to transfer the rights to this apartment to new buyer C for which tri-partite transfer deed is signed.
Q1. How is LTCG computed in this case? Is it the same method of indexation like sale of immovable property?
Q2. Since the first buyer A is made up of two individuals filing separate IT returns, can each claim 50:50 share in LTCG or that can even be 25:75 or any other ratio?
Asked 4 years ago in Property Law
Religion: Hindu

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5 Answers

The Mumbai Tribunal has recently ruled that holding period should be computed from the date of issue of allotment letter by the developer. If the investor sells the property 36 months after receiving the allotment letter, it will be considered as a long term capital asset. The seller would then need to pay LTCG tax on it, which would reduce his tax outgo. This judgement follows the decision of high courts in the case of Commissioner of Income Tax (CIT) vs K Ramakrishnan and CIT vs SR Jeyashankar.

1. Yes, the agreement date or allotment date of calculation of time period and the agreement shall be treated as valid conveyance for transfer of the property so the indexation shall be calucated as sale of Immovable property you will get the benefit of long term capital gains.

2. if nothing in agreement of share is written than it will be deemed to be 50 percent share of the both the individuals.When two or more people buy a property but do not specifically mention the share that each has in the property, a 'tenancy-in-common' is created. All the coowners can use the entire property and every co-owner is deemed to be having an equal share in it. So you can claim 50 percent capital gains out of your share.With respect to property jointly owned by co-owners, Section 26 of the Income Tax Act gives clear guidelines for taxation of the share of such co-owners in a building. The share of income in the property, may be either in the form of rentals or may even be capital gains arising at the time of sale of such building. The section provides that in case the share of each of the co-owners is clearly defined and is ascertainable, then, the respective share of each co-owner shall become taxable in their hand as an individual. And both can get benifit under Section 54F on purchase of house.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Since property has been purchased in joint names both can benefit of LTCG equally

2) the sale deed does not mention the share of each joint owner . Hence both can claim equally

3) In case you Sell the property before you take the possession, the taxability of profits made on such sale will depend on the time interval between your date of booking the property and the date of agreement to transfer your right in the under construction property

4) in your case sale is after period of 3 years it would attract LTCG

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

Long term capital gain may be shared by both individuals in the proportion of shares held by them under construction and sale agreement and the indexation cost invested by them with the builder. In absence of any such share in the sale and construction agreement long term capital gain will be 50:50

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

LTCG can be calculating for the house property sold.

Her there is no registered sale deed.

The current transaction relates to transfer of sale agreement and not sale deed.

There fore you check with your lawyer that whether this will under LTCG or not.

T Kalaiselvan
Advocate, Vellore
78131 Answers
1543 Consultations

5.0 on 5.0

A per se is not the owner of the apartment, he is merely an agreement holder, who is transferring his rights in favour of C with the consent of B through the Deed of Assignment. The profit that A is making in transferring his rights will attract Income tax under Income from other sources and not under the head Capital Gains Tax.

A was the intended purchaser, who transferred his rights in favour of C, C steps into the shoes of A and therefore from date of acquisition till C sells the property, capital gains will be computed only so far as C is concerned, and A will not figure in this calculation.

Kiran N. Murthy
Advocate, Bangalore
1298 Answers
194 Consultations

5.0 on 5.0

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