• LT vs ST Capital Gain on sale of property

I purchased a flat in NCR region in 2008 for which the allotment date was in Dec, 2008. An agreement with the builder was executed in July, 2009 and finally the registry (conveyance deed) was done in July 2014. 

This builder had been facing a lot of issues and even after registry we were not given possession of the flat. We sold the flat to a buyer in December 2015 and even at that time we did not have flat's possession.

My key question is which date should be considered as 'Purchase Date' in this situation to determine whether I will need to pay long term vs short term capital gain?
i) Allotment date in Dec 2008
ii) Agreement date in July 2009
iii) Registry date in July 2014

If allotment/agreement date is the date of purchase, I would have made significant loss after accounting for indexation as the purchase and sale prices were not very different. How long this capital loss be carried forward and can it adjusted against long term capital gains made on sale of another property in future? 

Thanks in advance!
Asked 5 months ago in Property Law from Pune, Maharashtra
Religion: Hindu
1) property rights wete acquired by you when allotment letter was issued by builder 

2) since flat sold in December 2915 it would attract long term capital gains 

3) even if sale deed executed in 2014 and yiu sold it in 2015 it would attract long term capital gains as allotment letter issued in 2008

4) loss can be carried forward for period of 8 years 
Ajay Sethi
Advocate, Mumbai
23206 Answers
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You will become the owner of the flat only from the date of execution of registered sale deed on your name and not allotment date or date of sale agreement. 
The computation for calculation of long terms capital gains shall be from the date of the registration of sale deed.












How long this capital loss be carried forward and can it adjusted against long term capital gains made on sale of another property in future? 

Since you have got the registered sale deed executed in your name in July 2014 and have sold the property to a third person in December 2015, this may not attract the provisions for exemptions under LTCG.
You may consult your auditor for further issues 
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
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Hi 
1) The date of sale deed (July 2014) is the purchase date.

2) From the conveyance deed we need to check whether any possession was also handed over to you (even a notional possession is a possession under sec 53 A of transfer of property act). 

3) If the conveyance deed dated July 2014 includes possession, then the purchase date is only July 2014. 

4) Short-term capital loss can be set off against long-term or short-term capital gain. If loss under the head “Capital gains” incurred during a year cannot be adjusted in the same year, then unadjusted capital loss can be carried forward to next year.

5) In the subsequent year(s), such loss can be adjusted only against income chargeable to tax under the head “Capital gains”, however, long-term capital loss can be adjusted only against long-term capital gains. Short-term capital loss can be adjusted against long-term capital gains as well as short-term capital gains.

6) Such loss can be carried forward for eight years (8 Assessment years) immediately succeeding the year in which the loss is incurred.

7) Such loss can be can carried forward only if the return of income/loss of the year in which loss is incurred is furnished  on or before the due date of furnishing the return, as prescribed under section 139(1). 

8) Mandatory Filing of IT return in order to carry forward and set-off of a loss in stipulated time

9) As per section 80 of Income tax act, the assesses must have filed a return of loss under section 139(3) in order to carry forward and set off a loss. In other words, the non-filing of a return of loss disentitles the assesses from carrying forward the loss sustained by him. Such a return should filed within the time allowed under section 139(1).

Hope this helps.
Rajgopalan Sripathi
Advocate, Hyderabad
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43 Consultations
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The relevant date would be the date of registration and not the date of possession or allotment.  The property will be taxed as short-term capital gain as you have held the property for less than 3 years. The period for which the property has been held is the touchstone to attract short-term capital gain or long term capital gain tax. 
Ashish Davessar
Advocate, Jaipur
18093 Answers
448 Consultations
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allottment letter will determine date of purchase of property and not date of execution of sale deed 

2)to qualify the investment in case of builder flats, the crucial date is the date of allotment of the residential flat and the payment of installment is a follow up action. Allotment is a sufficient compliance for getting the benefits, even if the taxpayer has not paid all installments due under the said scheme. The provisions of the section are a beneficial provision for promoting the construction of residential house. Thus, the date of issue of an allotment letter gives a right to the taxpayer (Intended buyer) to obtain conveyance on the said flat so that it becomes an asset within the purview of the Income-tax Act. The date of acquisition of the said flat shall be the date on which the allotment letter is issued to the intended buyer.
Ajay Sethi
Advocate, Mumbai
23206 Answers
1218 Consultations
5.0 on 5.0
Even after the registry, no possession was offered (I have emails from the builder as a confirmation) and even when we sold the unit in 2015, we did not have the possession. Will that have any effect on the purchase date?

It was your fault that you did not insist the possession even after getting the property registered on your name.  No doubt this will have adverse impact to you at this stage.






I had already paid 95% of the money to the builder till 2010 and because my money was stuck with the builder for next 5 years, I made losses (by not being able to invest that money elsewhere). Even in scenario like this, will Income tax rules make me suffer and not allow to claim long term capital losses because the delay was purely builder's fault and I had no control on that? 

The income tax rules have not been framed for the convenience of  any individual in particular nor it is based on the situation of any individual. This is a common law and cannot be disputed in terms of your understanding and worries pertaining to your own situation.
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
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