I had booked one residential flat in December 2017. I want to promote the identical earlier than taking the possession. How can I save my tax legal responsibility on such sale?-—Name withheld on request
In case you promote an under-construction property earlier than possession, the earnings made on such sale might be taxed as short-term capital features or long-term capital features relying on the time interval reserving date and the date whenever you truly promote your proper within the under-construction property.
In case the interval will not be greater than 36 months, the earnings made shall be handled as brief time period capital features and shall be added to your common earnings which can then get taxed on the slab charge relevant to your common earnings.
Since you might be planning to promote it after 36 months the earnings shall be taxed as long run capital features. You can avail the befits of exemptions accessible for investing in one other home beneath Section 54F and never 54 for which you’ll have to make investments the web sale consideration as a substitute of listed long run capital features which is offered in case of sale of a residential home.
Read Also: Recovery of residential sector could take longer: Icra
Whether you might be promoting a residential home or a proper to amass a property is a debatable situation however for my part what you might be promoting is your rights to amass a property and never the property itself.
So the upper holding interval requirement will apply and likewise you can also not avail the tax exemption beneath Section 54EC which is offered solely in respect of long run capital features on sale of land or constructing and what you might be promoting is neither of it.
The value for the aim of capital features shall embody the quantities paid by you to the builder over the interval in addition to the stamp responsibility and registration prices nevertheless since that is long run asset, additionally, you will be entitled to get your value listed with the assistance of value inflation index of the 12 months of reserving and the 12 months of sale.
Balwant Jain is a tax and funding skilled and may be reached on [email protected]
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