Relevant date to calculate LTCG

Last Updated On: Feb. 9, 2020, 1:49 p.m.

In a judgment with significant implications for property owners, the Income Tax Appellate Tribunal (ITAT) ruled that ownership of property will be counted from the allotment date of a property.

The ruling presents substantial benefits to property owners, who may be planning to sell a property and were seeking clarity regarding long-term capital gains (LTCG) on the said property. 

Long-term capital gains at present clocks in if a property is sold within 24 months of the purchase. Prior to the financial year 2017-18, one could avoid paying long-term capital gains by holding the property for more than 36 months. 

According to the understanding until now, the ownership was taken into account from the date of the registration. Since, often, many properties are registered much later than the completion of the transaction and possession, it was a bone of contention for property owners. 

from now holding of a property simply from the date of registration will be considered for the purpose of computing long-term capital gains tax, and not the date of registration. 

Often, owners sell a property and reinvest the amount thus collected, in another property, after possessing it for a minimum of three years to avoid having to pay any long-term capital gains tax. 

The report cited a case where a person paid a substantial amount and got a letter of allotment for a duplex flat in February 2008, even though the registration agreement was signed only in March 2010. The same property was sold in April 2012. 

So as per existing practice and understanding the Income Tax officials perceived the transaction falling under the category that qualifies payment of long-term capital gains tax. The owner, however, contested the order saying he got the allotment letter much earlier. The Income Tax Tribunal ruled the property owner would not qualify for long-term capital gains-LTCG. 

The ruling has significant implications for lakhs of property owners who may be facing a similar dilemma and would not want to fall in the tax net.


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