K K Agrawal (Senior Vice President) 06 March 2013

Date of acquisition for long term capital gain

Dear Sir /Madam

I wish to know as to what will be the date of acquisition amongst following date for purpose of calculation of Long term / short term capital gain for a residential flat booked with builder under construction linked payment plan in a multi story apartment .

1. Date of issue allotment letter of the flat after receipt of booking amount by the builder i.e., say May 2009.

2. Date of signing buyer purchase agreement between buyer and builder i.e., say July 2009 .

3. Date of handing over of physical possession of the flat i.e., say July 2012

4. Date of registration of sale deed between buyer and builder i.e, say December 2012

In case the flat is sold in March 2013 whether it will be short term capital gain or long term capital gain .

Regards

KKAgrawal

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4 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 06 March 2013

Let us try to understand this with a simple example.

An asset was purchased in FY 1996-97 for Rs. 2.50 lacs
This asset was sold in FY 2004-05 for Rs. 4.50 lacs
Cost Inflation Index in 1996-97 was 305 and in 2004-05 it was 480
So, indexed cost of acquisition would be:

Rs. 2,50,000 * (480/305) = Rs. 3,93,443

Long Term Capital Gains would be calculated as => Capital Gains = Selling Price of an asset – Indexed Cost i.e. Rs. 450000 – Rs. 393443 = Rs. 56557. Therefore tax payable will be 20% of Rs. 56557 which comes to Rs. 11311.

Had it not been for indexation The Capital Gains tax would have been = Selling Price of an asset – Cost of acquisition i.e. Rs. 450000 – Rs. 250000 = Capital Gains is Rs. 200,000. Therefore tax payable @ 10% of Rs. 200000 would have come to Rs. 20,000.

K K Agrawal (Senior Vice President) 07 March 2013

Dear Mr Rama Chary

Thanks for your reply . Actually my question is regarding relevance of the date of purchase of a property from a property builder which is not constructed / under construction for the purpose of date of acquisition . Whether the date of purchase is the date of booking the house on payment of booking amount or the date when the property has been transferred after completion of construction , through execution of sale deed . In a multi story aparment the time difference is more than three years from the date of booking of flat to the handing over of physical possession of flat.

Regards

KKAgrawal

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 08 March 2013

Execution of sale deed date is to be consider. in your querry

R.V.RAO (retired) 08 March 2014

P&H High Court has held in the case of Mrs. Madhu Kaul Vs. CIT that identification of the flat or physical delivery of possession is irrelevant as right to hold properly stands crystalised upon allotment. The allotment of a particular flat and delivery of its possession would relate back to the allotment. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.

source:www.tax guru.in march 2014