I am a resident of Mumbai, i used to own a 1bhk flat in the suburbs which i sold for 75 lakhs on 1st May 2013 (Registration date).
Using this money i bought a 2bhk flat in an under construction building for 95 lakhs in the same month. Till date i have paid about 85% of the flat value to the builder and the building is still under construction.
We have not yet paid stamp duty or registration and receiving OC is also out of question since it is still under construction.
I am worried that i might have to pay Capital gains tax since there has been no official paperwork of the new house even after 3 years.
Please advise further course of action in this case.
Asked 2 years ago in Property Law from Mumbai, Maharashtra
1) You would be entitled to benefit of long term capital gains tax as you have already paid consideration to the builder and received allotment letter from builder
2) even if you have not received possession of flat you can claim benefit of LOng term capital gains tax
Hopefully you have an agreement of sale (unregistered one) with the builder and hopefully you have made all your payments by cheque.
Since you have already invested in construction of a building and since section 54 of Income tax act dealing with exemptions on capital gains is a beneficial exemption, You need not worry much on the issue of capital gains.
Technically you have complied with Sec 54 of Income tax act as you have made payments to the builder for construction of the building (assuming you made payments through bank) and the construction work is in progress and there is no fault or delay from your end.
Hope this helps.
but put pressure on the builder to atleast do the registration of the property at the earliest.
oc is not necessary but possession over the property is necessary because you should take possession over the new flat within 3 years from the date of sell of property if you want to save capital gain tax.
at this stage you have to show guilt of the builder for delay in possession so you should send a legal notice to the builder for delay in construction and also claim compensation as par the agreement. it does not matter that registration is not done.
your notice will protect you because it shows that you are always ready to take possession over the property and also ready to complete all the legal proceedings like registration etc. there is no mala fide intention from your side. you should also mention it in ITR
Thanks for your help,
when i sold my original flat in 2013 for 75 lakhs I paid 65 lakhs to the builder (by cheque) for my new flat, the balance amount of 10 lakhs was put into a fixed deposit account.
i have been paying income tax on the interest received from that fixed deposit for 3 years now.
Should i move this amount to the Capital Gains Account now? (the building is 80% complete as on today)
or should i pay the builder in full and get the stamp duty / registration done asap?
Asked 2 years ago
pay the builder in full and get sale deed executed in your favour duly stamped and registered
this 10 lakh is taxable income. you cannot change its nature by investing into registration of this flat with a view to save capital gain tax.
you ought to invest it into any capital gain tax saving fund and thereafter use in registration of this flat.
You can claim tax exemption on the long-term capital gain on the sale of a house. To avail of this exemption, you must use the entire profit to either buy another house within two years or construct one in three years. If you had already bought a second house within a year before selling the first one, you could still avail of the tax exemption. Such capital gain exemption is reversed and the amount taxed as capital gain if the new property is sold within three years of the date of purchase/construction. This profit will be considered a short-term gain and taxed at the normal slab rates, not the 20% beneficial rate. However, unless the sale deed is registered the exemption cannot be claimed.