Capital gain exemption

Facts given: I booked a flat with a private builder in Dec’2009 jointly with my wife. 90% of the payment has been made by us till date. The project is delayed and the actual possession will be given to us in March or April’2014. At this moment i.e. before getting the possession and also before the registration of property, we are planning to sell this property.  As per the sale agreement, Sale proceeds will be given to us after deduction of balance payment due to the builder which will be paid directly by the new buyer. The builder will append a transfer memorandum with the Original Allotment letter(issued in our name) and will transfer the under construction property in the name of new buyer.

Your Queries:1)    Whether this transaction will be considered as a sale of residential house or a RIGHT to own a residential house? In other words, should We claim exemption u/s 54 or 54F?

2)    Whether the buyer need to deduct TDS u/s 194IA, if the total sale consideration is more than 50 lacs but the individual share of  me and my wife is less than Rs. 50 lacs?

Reply: What you are selling is not any house property but only a right  to have  a building constructed. Therefore you cannot claim any exemption under S 54, and there is no .

The next question to be examined is whether the right was held by you for more than 36 months. It has to be decided on the basis of Interpretation of the Agreement between you and the builder.

As you are not the registered owner of any immovable property, the provisions of S.194IA are not attracted, and the buyer need not deduct any tax under S.194IA.

sir, First you have get registration, because registered owners can gets tax benefits easily, in your case tax provisions not fulfil to get capital gain

You are not selling Residential House, You are transfer 'Your right of possession' on such house.

Selling of rights are considered as 'Trasfer' under section 2(47) of IT https://www.exploreincometax.com/Indian-Income-tax-Act-1961/Section-2-47

thereby the Transfer would be taxable under capital Gains.  Since held morethan 3 years, your will be Long term capital gains.

residential house property, if such gains (not the whole consideration) is utilised to purchase or construct another residential house. It should be noted that the new house should be purchased within one year before or two years after the date of transfer. In case of construction, the new house should be constructed within three years from the date of transfer. Exemption will be limited to the capital gains or the cost of the new house, whichever is lower

LTCG is exempt for an individual or HUF where it is realised on sale of any capital asset, not being a residential house, if the net consideration (not merely the gains) is invested in purchase or construction of a residential house. The timeline for purchase or construction is the same as mentioned above. However, to avail this benefit, the assessee should not own more than one house other than the new asset on the date of transfer. As per the recent clarifications made in Finance Act, 2014, the purchase of house property to claim such exemption has been restricted to one residential house property situated in India. Exemption in this case will be proportionate to the amount invested in relation to the net sale consideration.