LTCG :: Under Construction builder flat

POSTED BY Bhupinder ON August 9, 2011 6:54 am COMMENTS (3)

I have sold my flat & profit from it will be LTCG . I booked two Under Construction Flats  ( by paying 10% amount ) 15 months  before sale of my old flat . I hv paid another 40% in 12  months prior to sale of my old flat & will be paying another 30% before filing income tax return on 31st July 2012 . Now My question is will 40+30 % = 70% will be taken as reinvestment from LTCG . I  donot want to open LTCG A/c & wish to pay Tax on left over money ( Preceed from sale of old flat –  ( 70% amount paid to builder } X 2 flats.

Need expert advise if my above decision is correct


3 replies on this article “LTCG :: Under Construction builder flat”

  1. ashal jauhari says:

    Dear Bhupinder, From your detailed reply, let me understand your whole query. You booked your 2 new flats in march 2010. Sold your old flat in july 2011. The 2 new flats are at 2 different locations say location A & location B. Possession of these 2 flats ‘ll be with you only around 2015.

    My dear friend, you are in deep trouble. To claim LTCG set off benefit against purchase of a residential house under section 54, possession of your new house is a pre condition. Here are they. You have to fulfill any one of it.

    1. Within 1Y prev. to sell of your existing house i.e. for your case from August 2010 to July 2011 – as per your reply not applicable to you.

    2. Within 2Y from the date of sell of existing house for a ready built house i.e. within June 2013 – again not applicable to you.

    3. Within 3Y from the date of sell of your existing house for a under construction house i.e. till June 2014 – Again not applicable to you.

    From the above situation, it’s quite clear to you now that possession of your house should be there with you latest by June 2014 (or exact 3Y date for July 2011 – the sell date).

    There is more to it, as the 2 new flats are at 2 different locations & not adjoining flats, you can claim LTCG set off against only one flat (if some how you are able to get the possession of your house within that 3Y period).

    Please check the below link for detailed info –

    http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=e95fa549-f6e6-40cb-b906-6208a5f70b29&rdb=sec&yr=e5be6bdb-1fc4-42d6-ac7b-34a44fd65485&sec=54&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws

    Thanks

    Ashal

  2. Bhupinder says:

    I explain it again .

    Flat sold in july 2011.
    Bought 2 under construction flats from different builders by paying 10% booking amount in june 2010 .
    Paid 40% of LTCG till july 2011
    Will be paying 30% of LTCG untill I file my return on july 2012 .
    Possession of these flats may be offered after 4 year that is july 2015

    Now I want clarification if it is date of booking of flat or date of making payment which is counted for underconstruction property ( one year before or 3 year after sale of old flat ) as in my case booking was made one year before sale of old flat & possession can be after 3 year of sale of old flat & I want to claim LTCG only for payment made to builder within 1 year of sale of old flat untill filing of return on 31st july , 2012. I understand i cannot sell these flats till 3 years after possession..

    Please help…

  3. ashal jauhari says:

    Dear Bhupinder, let me understand your query in actual month time frame.

    I assume you sold your flat in April 2011 but you have already booked 2 flats in January 2010.

    If my understanding is correct, I’m afraid my dear friend you are not in position to save tax on your LTCG, unless the following conditions are met.

    1. the 2 flats are adjoining flats to make a single living unit.
    2. possession ‘ll be with you within 2Y i.e. till march 2013 from the date of sell of your old flat.

    Your query is silent on the possession part of your new flats. So any body here can’t say more.

    Thanks

    Ashal

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