Hitanshu Agrawal (Investment Banker) 30 December 2014

Capital gains on flat transfer

I sold a flat in May 2014 (purchased in May 2008), capital gains from which were around Rs. 60 lakhs. I am now (Dec 2014) purchasing an under-construction flat in a multi-storied building. Builder will endorse the original builder buyer agreement in my favour. Original agreement is at a value of Rs. 62 lakhs. My transaction (resale - buying from original allottee) value is Rs. 1.2 crore. I am taking a loan of Rs. 50 lakhs for part funding. I understand registration on possession will be on original agreement value with the builder.

Am I safe as far as long term capital gains tax on flat sale of May 2014 is concerned, as I have actually re-invested more than that? Only confusion is that the full amount would not come into registration records. Of course, I will pay TDS on the transaction am doing now, as per the Rs. 1.2 crore value (I have entered into a stamped and notarized agreement with the original allottee for this transaction).

If there is an issue, what would be the way out?

Thank you so much for your guidance.

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3 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 03 January 2015

If the property is held for more than 36 months tax liability will be there.

Vineet (Director) 04 January 2015

as understood, you are buying new flat for 1.2 crore out of which 62 lakh will go to builder and rest to reseller. since you are taking loan of 50 lakhs, balance 70 lakhs you will pay from your own pocket. you will have notarised agreement with seller for whole amount but registered agreement with builder will be only for 62 lakhs. right?

you are entitled for exemption of long term capital gain of 60 lakhs. so no worries on that front.

i see problem of stamp duty at the time of registration because authorities may demand stamp duty on market value which will be more than agreement value. further IT authorities may also raise gift tax issue at that time. i would suggest that you enter into a tripartite agreement with seller and builder right now specifically mentioning total consideration and amount payable to builder. dont forget to deduct tds @1% on all payments made by you to builder as well as seller.