Kaustav (Consultant) 24 July 2014

Need help with a house sale agreement and capital gain tax

Hi - I am looking for some guidance in terms of understanding the best way to handle my situation and cover all tracks while preparing a sale agreement .

Property: Purchased with a home loan, registered on Oct 2011

Questions on Sale agreement:

My lawyer mentioned in the agreement about the loan, and I am asking for the existing loan amount as the commitment/booking money from the purchaser, so that I can repay the loan and release the papers. However, I want to add a clause that in the event that the deal is cancelled by the purchaser, I can only repay his money after I sell the flat to someone else - is that legally possible?
If the answer to the above question is yes and I land into that issue, unfortunately, then how do I handle my future agreement(s)? Generally it is mentioned in the agreement that the 'said property is free from all encumbrances attachments, charges, liens, lispendens, claims and demand whatsoever...'
I also want to mention in the clause that any unforeseen delay caused by the bank in releasing the documents can not be held against me if I can provide evidence that I have done all my part to repay the loan and release the papers in a timely fashion. Under such circumstances, purchaser need to wait till the release of the documents. I would give him possession though as soon as he pays the rest of the money (if he is willing) - is that ok?

Questions on Capital Gain Tax:

I have to pay '20% mandatory Cap Gain tax if property is sold within 3 years of purchase'. From which point should that that 3 years be counted - from the date I signed the sale agreement, or from the time I completed registration?
If answer to the question is latter, then will it be considered 'within 3 years' if purchaser paid the whole amount within 3 years, but his registration is done after 3 years of my registration date?
Is it true that the Cap Gain Tax is also calculated as per the municipality standard rates (as it is done for registration charges) and not as per the sale agreements?

Thanks a ton for all the help I get on this - really appreciate it.

Regards,

Kaustav

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5 Replies

Dr J C Vashista (Advocate) 24 July 2014

It would be from the date of execution of documents of sale and not agreement to sell.

Yes, it will be as per circle (municipal) rates or the consideration amount, which ever is higher.

You may seek second opinion from tax consultant..

Kaustav (Consultant) 24 July 2014

Thank you sir.

The execution of the sale agreement is equivalent to registration, or is it equivalent to completion of payments?

Also, if you can help me with the first three questions that will be very helpful too.

Thanks,

Kaustav

BHANU RASPUTRA (ADVOCATE & SOLICITOR divyatta.r@gmail.com) 26 July 2014

pl. take guidence from local advocate. where is property . sale agreement to drafted in proper wording .

T. Kalaiselvan, Advocate (Advocate) 27 July 2014

I have to pay '20% mandatory Cap Gain tax if property is sold within 3 years of purchase'. From which point should that that 3 years be counted - from the date I signed the sale agreement, or from the time I completed registration?

It will be from the date of execution of registered sale deed.

If answer to the question is latter, then will it be considered 'within 3 years' if purchaser paid the whole amount within 3 years, but his registration is done after 3 years of my registration date?

Why is it so?, the purchaser is entitled to get it registered on the same day when he has settled the entire sale consideration amount.

Is it true that the Cap Gain Tax is also calculated as per the municipality standard rates (as it is done for registration charges) and not as per the sale agreements?

What is sale agreement rate and what is municipal rate? If you have derived an amount in excess of the rate mentioned in the sale deed, how is this accounted ? So it is always the amount mentioned in the sale deed

Dr J C Vashista (Advocate) 27 July 2014

@ Kaustav,

It is a vague question "The execution of the sale agreement is equivalent to registration, or is it equivalent to completion of payments?" Since there can be no parity in "The execution of the sale agreement .." which an agreement between the vendor and vendee to sale/purchase a property vis-a-vis "registration" is documenting the said agreement in presence of government official, hence both are different connatations which cannot be stated to have any equivanlancy.

Later part of your query, "...or is it equivalent to completion of payments" is again a vague question since payment for an agreed sum as consideration of a property may be at the time of agreement itself or deffered/ staggered, which has a direct bearing on the final execution of the document of SALE DEED and transfer of property in the name of vendee/purchaser.

It would be better to contact, engage and consult a local lawyer.