Sir, please help me with this issue:
First of all my thanks for helping us with our financial issues, I am continuing from your response on Facebook to my query.
I had booked a row house way back in Feb.01, 1992 (yes 1992) for Rs.600,000/- and expected completion Dec.31, 1993 as per a provisional agreement (not registered) signed between me and the builder. Payment was made by cheques between February and April 1992, I have the receipt copies from the builder.
Now the row house is ready and occupation certificate received in June 2018, but not yet registered in my name at the Sub Registrar’s office. May I request your help with the following:
1. I am not able to sell the row house as it is not registered. The potential buyers cannot afford to make all the payment, so they need to take a loan, but the bankers require that the row house be registered before they give a loan to their customers.
2. The builder is willing to cancel the provisional agreement and make an affidavit for transfer of ownership and pay me the prevailing value (consideration of Rs.20 lacs) of the row house. Is this acceptable from income tax point of view?
3. If the answer to item 2 is yes, can I claim LTCG?
4. If the answer to item 3 is yes, is the following calculation correct?
FMV (fair market value) x (CII for FY 2018-19/CII for FY 2001-02)
Considering that I had paid the full amount of the cost of the row house in April 1992, I have taken the FMV at Rs.600,000.00
Rs.600,000 x (280 /100) = Rs.16,80,000
Sale consideration is Rs.20,00,000/-
LTCG = Sales consideration – CII amount
20,00,000 – 16,80,000 = 3,20,000
Invest LTCG of Rs.3,20,000 in REC/NHAI bonds for exemption under section 54EC.
5. If none of the above is workable, can you suggest any other options?
6. You may be pleased to know that I worked the LTCG using your article on LTCG on Aug.11, 2017.
Many thanks for your help.
Saby Lacerda
1 Answers
Dear Saby,
If the initial (Provisional) Agreement confers upon the ownership right to you then you can transfer the Property rights back to the Builder, as mentioned in the Point No.2. It can be treated as good as a re-sale.
I believe that whether it is scenarios (point 2) or point no.4, you can claim LTCG.
But, if you get the property registered in your name and then try to re-sell it then it can become a tricky affair and there are conflicting Court judgement on this topic.
(I am assuming that Fair Market Value (NAV) as on 1 st April, 2001 is considered as cost of acquisition for calculating capital gains)
Kindly go through related articles :
Dear Sir, Thank you indeed for your quick response. Kind regards.
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