Ltcg :: under construction builder flat

The entire capital gains on sale of first property will be treated for the purpose of tax and you need to pay tax on the capital gains. The benefit of reinvestment does not accrue.

Thanks ,

a) It is because flats were not booked within 12 months of sale of old flat or some other reason ?

b) Is it ok if I buy another under construction flat after sale of old flat & use part of the LTCG & pay tax on unused money before filing return on 31st July 2012 . Is it must that under construction flat must be ready within 3 year of sale of old flat ?

The reason being that the basic condition regarding investment of LTCG in eligible assets is violated viz. the re-investment is sold within 3 years of being invested, the entire LTCG will be taxed. The second option suggested by you is viable.

Thanks but I think there is some misunderstanding . I explain it again.

I sold 10 year old flat & gain from it will be LTCG.

Booked two Under Construction Flats from builder ( by paying 10% amount ) 15 months  before sale of my 10 year old flat.

I hv paid another 40% in 12  months prior to sale of my 10 year old flat & will be paying another 30% before filing income tax return on 31st July 2012 .

Possession / registry for these two flats will be offered in 2014 / 2015 . I will not sell these two flats till 3 years after possestion .

Now My question is will 40+30 % = 70% ( that is what I paid to builder for two new flats one year before sale of my 10 year old flat &  till filing of income tax return in july 2012 . ) will be taken as reinvestment from LTCG .

Dear sheryl,

It will be taken as reinvestment from Long term capital gain.

For your reference, i would suggest you to check out a judgment: CIT vs. H.K. Kapoor [1998] 150 CTR (All.) 128, where it had been held that, "Exemption on capital gains could not be refused to the assessee simply on the ground that the construction of the new house had begun before the sale of the old house". I would also like to clarify you further that, the purpose behind the exemption u/s. 54 (1) is that the capital gains arising out of the sale of the earlier house should not be taxed.

Thanks but I am confused as before .

Are u sure as I am getting conflicting views ?

Some CA's  are saying that for reinvestment in underconstruction property , investment has to be made after sale of old flat . Also it can be done only in one flat .

I  also 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 will be before one year before sale of old flat & possession can be after 3 year  of sale of old flat & I will claim LTCG only for payment made to builder within 1 year of sale of old flat till filing of return on 31st july , 2012.

please help.

It is the date of booking of flat/date of agreement to purchase the property that should be considered for counting the period of holding of the asset. There are several judicial rulings. secondly, i would again like to mention that the court has decided that the date of commencement of the construction of the new house/flat is immaterial. Check out the judgment. it may clear your doubts.