Legal ownership of a property
I purchased a property in 2000 but the sale deed was registered in 2013. I then sold the property in 2013 itself. Am I liable for STCGT or LTCGT, since technically AND legally, I became the owner of the property only in 2013, when the sale deed was registered.
Asked in Property Law from Vadodara, Gujarat
Please provide details of property, i.e. Open plot, apartment. When you sale any property, according to the law, you have to fulfill all legal government, semi-government, corporation tax what ever debts out standing.
1) as per the current income-tax rules, long-term capital gains on sale of a property held for three years, attracts 20 per cent tax.
2) Date of purchase of the house for the purpose of claim-ing deduction u/s.54 would be the date on which the assessee takes possession of the house and not the date of registration of the sale deed. CIT v. R. L. Sood, (2000) 245 ITR 727 (Del.)
3) in your case agreement for purchase of house was done in 2000 payment was made by you in in 2000, possession granted in 2000 hence sale would attract long term capital gains tax
1. Long term capital gains tax on a property @ 20% is applicable in the event that the property is held for three years.
2. Your query is silent as to whether you took the possession of the house prior to the sale deed being registered in 2013. If you took the possession of the house at the time of purchase then sale would attract long term capital gains tax.
1. If you have made full payment for purchasing the flat in the year 2000 and have taken possession of the said flat in the same year, then it will be considered that you have purchased the flat in the year 2000 for the purpose of computing capital gain taz on its resale,
2. Hence, your said resale of the property will attract long term capital gain tax on the capital gain after indexation, which is 20% presently.
@ Mr. Sethi: 1) The property being an office block in a commercial complex, is it u/s 54 or its other sub-section? 2) I don't want to claim deduction u/s 54, but want to pay upfront CGT. Given that, my specific concern is, do I pay st or lt? My layman's instinct says that I became the legal owner of the unit only in 2013 after the sale deed was registered. So, for the purpose of CGT calculation and NOT for the purpose of claiming deduction u/s 54, shouldn't I be paying STCGT, since I sold the property in the same year that I became its legal owner. Please address this specifically, will appreciate legal precedents, if possible. Thank you.
Asked 2 years ago
You must pay 20% of the amount as capital gain if you have not invested in any property or cleared debts etc?the date of executing the sale deed is the purchasing date. Though you made agreement in 2000 it was registered only in 2013.if the same is to purchase a new house with a period of one year before or 2 years after selling the house or if you buy under construction property the construction if completed with 3 years of the selling of the house you can seek for exemption under section 54 .Did you reinvested or purchase any property.
1. Your layman's instinct is appreceable while deriving that it should be STCG since you became the title holder of the property in the year 2013 and sold it in the same year,
2. Had you not registered the prperty in the year 2012, which made you its title holder, you would not have been in a legal position to sale and register the sale deed in the year 2013,
3. However, while calculating the capital gain tax, the argument is different. You have invested the full amount of the consuderation in the year 2000 and had taken possession of the flat after which you made capital gain in the year 2013 when you sold that flat,
4. So, your investment on the flat in the year 2010 fetched you a capital gain in the year 2013 i.e. after a span of 13 years,
5. Based on the above logic the instant gain is LTC Gain.
1) profit from the sale of a property is taxed under Short-Term Capital Gains when the resale of the property has been done in less than 3 years from the date of the original purchase of the property.
2) in your case property has been purchased in year 2000 . possession granted in year 2000 . although registered sale deed made in 2013 and you sold it in same year it would attract long term capital gains . since property has been sold by you 13 years after purchase .
3)since you dont want any tax deduction by reinvesting sale proceeds you will have to pay long term capital gains tax .
4) Section 54F deals with transfer of capital asset other tan residential property . for claiming benefits of long term capital gains you have to meet the conditions specified therein .
1) Date of purchase of the house for the purpose of claim-ing deduction u/s.54 would be the date on which the assessee takes possession of the house and not the date of registration of the sale deed. CIT v. R. L. Sood, (2000) 245 ITR 727 (Del.)
2) IT v. Shahzada Begum, (1988) 173 ITR 397 (AP); held date of taking possession of property is material and not the date of registration of sale deed for computing prescribed time limit
STCG is applicable only in the instance where he Asset is held for less than 36 Months.
As the purchase of the property took place in the year 2000 by virtue of the Sale Deed you became owner and from that date your capital gain begins to be calculated.
Therefore despite the fact of the property not being registered in 2013 you have been legal owner from day 1
Therefore you are liable to pay LTCG.
If you wish to get any deduction in the LTCG you will need to take recourse to provisions u/s 54B/54D/54G/54GA
Long Term Capital Gain Tax Rate is @20% now
1. The property has been sold by you 13 years after its purchase. So it will attract long term capital gains tax as the property was sold after being held for 36 months or more from the date of entering into possession thereof.
2. The capital gain made in 2013 by the sale of the property is taxable as long term capital gains tax. The date on which you became the legal owner of the property is immaterial in so far as calculation of capital gain tax is concerned.
A. Applicable of STCGT: Please compute your total income and if it is less Rs. 2,00,000/- then just relax your income is not taxable and if it is more than Rs. 200000 then you have to pay tax. Hence this is not applicable in your case due to B clause reason.
B. Applicable of LTCGT: Even though you are the legal owner in the year 2013 and you have received income in the year 2000 as an owner but property has been registered in the year 2013. Hence, here we are not looking only origin of ownership so we have to compute term of income is the main criteria. Hence, you are liable to pay LTCGT.
Okay, it's unanimously LTG. So, I will pay 20% on the indexed LTG amount after deducting the basic 200,000 exemption from it, right? The way I see it, it's:
1) Arrive at nett indexed LTG amount
2) Calculate 20% CGT on it
3) Add 3% edu cess to it
4) Add interest u/s 234a, 234b and 234c
5) Arrive at total
6) Deduct basic 200,000 from it
7) Pay up
Will appreciate specific and clear guidance, especially if above is NOT correct, with precedents. Thank you.
Asked 2 years ago
Date of purchasing will be taken for calculating capital gains so in my opinion if you if you purchase a house within 2 years of purchase or by under construction property and complete construction within 3 years you can get rid of paying capital grains.only in 2013 will be mutated in your name that it will taken into account
1) you have stated that you want to pay long term capital gains tax upfront .
2) as far as exact calculation of your tax liability is concerned your CA would be in better position to guide you .
A. Kindly contact tax expert due to matter points to be considered before the Charted Accountant.
B. You are liable to pay the LTCGT as discussed with an earlier commentary.
1. I think that the standard deduction of Rs.2,00,000/- will be deducted from the LTCG amount before calculating the applicable tax on it and not from the CGT,
2. However, get it verified from your Income Tax lawyer or CA.