• Property - flat possession

In June 2013, I sold my flat in Chennai. With that money I have booked a under construction flat in Chennai City in a large gated community in July 2013. Within a month of booking the flat, I paid 85% of the flat cost i.e Entire sale amount got from old flat + additional 50 % . Since then I'm paying EMI. As per rule if I don't get the possession within 3 years from sale of the property, then I should pay 20% as capital gains tax. On this line, I requested the builder to complete my flat and give the possession by May 2016. He has obliged and agreed to complete my flat  and give possession in next 2 weeks. Though work pertinent to my flat is almost over but utilites are not in place ( EB, Water, Drainage etc.,)My question here is 1) Will this suffice to get exempt from Capital Gains 2) Can I claim  Housing loan exemption from next month. Getting Completion certificate from local authorities will take time.Builder will take minimum another 1 1/2 years to complete entire campus. He has planned to handover blocks in phased manner starting from next month
Asked 7 months ago in Taxation from Chennai, Tamil Nadu
The relevant date would be the date of registration and not the date of possession or allotment. To avail of the exemption, you must use the entire profit to either buy another house within two years or construct one in three years. Once the registration has taken place the date of possession is immaterial. 
Ashish Davessar
Advocate, Jaipur
18088 Answers
448 Consultations
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Hi 
With reference to your query, you will be eligible to claim exemptions under sections 54 and 54F of the Income-tax Act, 1961 as the construction of work has been promised to be completed by the builder by May 2016. 

As per the definition of construction, i presume the builder has completed the following : (i.e slab work of your flat done, plastering of outer four side walls, plastering of internal room walls done, plastering of slab done, the property has a door affixed in the entrance, Access to property through stair case is complete  etc.) . if these are complete, construction is also complete. 
Just ensure that you have the possession of the property in some form or other. As pointed out by you that EB, Water , drainage etc are pending , you can also do a small house warming ceremony and take photo's of the same and keep it for records(ensure to have date and time stamp on it). House warming ceremony is a deemed possession. Even affixing a name board in the premises is deemed possession. .
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
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1) once builder has given you possession letter you can avail of benefit of capital gains 

2) you can claim housing loan exemption 
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
CIT vs. Sambandam Udaykumar (Karnataka High Court)
(22.4 KiB, 756 DLs)


S. 54F does not require construction to be complete within specified period
 
The assessee sold shares for Rs. 4.18 crores and, within 12 months, invested Rs. 2.16 crores thereof to construct a house property and claimed exemption u/s 54F. However, as even after the expiry of 3 years of the date of transfer, the construction of the house was not complete and sale deed not executed, the AO & CIT (A) denied relief u/s 54F though the Tribunal granted it. On appeal by the department to the High Court, HELD dismissing the appeal:
 
S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief (Sardarmal Kothari 302 ITR 286 (Mad) followed)
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
)My question here is 1) Will this suffice to get exempt from Capital Gains 2) Can I claim  Housing loan exemption from next month. Getting Completion certificate from local authorities will take time.Builder will take minimum another 1 1/2 years to complete entire campus. He has planned to handover blocks in phased manner starting from next month

In the above scenario, you may get the flat registered on your name immediately whether you occupy it or not, you can ask the builder to complete the construction (minor works) after having handed over possession and registered the flat in your name. 
This will enable you to avail the benefits of LTCG.
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
5.0 on 5.0
Hi, 
IT Department has this nasty habit of poking it's nose in such trivial things. So better to be prepared with pucca documentation and keep them safe till 2019 (IT guys have time up to 6 years to order scrutiny/reassessment under sec 143.. However  the law says construction and possession. The law does not say occupancy certificate  etc. So no worries. As long as construction is complete (as per my earlier posting) you don't need to worry. It's your prerogative to live in a residential community sans amenities.IT department cannot quote non completion of amenities as it is against Sec 53A of transfer of property act (Possession/part performance/deemed owner clauses are addressed in this section). So no worries.
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
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you can claim housing loan exemption.As per your words the flat registration will  come soon and you can avail of benefit of capital gains .Date of registration is important not taking the possession.When you have to register the flat the sale consideration amount is handed over to other party .
Ajay N S
Advocate, Ernakulam
1912 Answers
19 Consultations
5.0 on 5.0
1) rely upon judgment of karnataka high court cited by me 

2) the judgment mentions that  words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief 
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
Completion certificate for the completion of construction has nothing to do with acquiring a property by a registered sale deed.  
For LTCG benefits the property should have been bought within the stipulated period out of that sale consideration,  The IT department will not be concerned with other formalities. 
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
5.0 on 5.0
for saving of capital gain tax under section 54 of I T Act you can invest that sale amount into another residential property. if it is under construction then it should be constructed with in 3 years from the date of sale of previous property. 

your possession over the newly constructed is necessary therefore possession letter is sufficient because completion certificate is issued by the competent authority after completion of project. it may be possible that project will take some more time to complete due to construction of large number of flats etc. 
Shivendra Pratap Singh
Advocate, Lucknow
2737 Answers
41 Consultations
4.9 on 5.0

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