Shahid Balwa Elucidates: The Issue of Capital Gains Tax and Property Sale

by Dynamix Group Writer

From GST to RERA, policies around real estate are undergoing changes and bringing on new challenges for developers and builders. Yet, in the face of adversity, buyers have begun to slowly regain their pace and developers like DB Realty under leaders such as Shahid Balwa are beginning to gain ground.

One such issue is regarding how to make a decision on capital gains tax on property sale. Taxpayers have to face taxability of the capital gains when a house property is transferred or sold, which can be short-term or long term in nature. It actually depends upon the duration of time for which the person holds the property.

There is no express mechanism under the Act which can help one arrive at the date when a house was acquired, which has led to several discourses over the years. This is especially considering under-construction properties and also considering that various interpretations can be made at this point. Since the aspects are quite subjective, because of the variety of practices that exist and the fact that people can avail schemes that builders offer, a wide range of judicial proceedings exist. These proceedings have different interpretations on the date on which the property is acquired. This includes the registration date, possession date, the date on which the majority payment is done etc. Renowned industry leaders such as Shahid Balwa of DB Realty are affirmative about these reforms.

The facts warrant an examination so that an appropriate decision can be taken. A property buyer can claim an exemption against long-term capital gains if the person invests these sale proceeds or gains in order to construct or buy another property in India. Specific timelines also need to be taken into account, since if the construction takes more than three years to be completed, such an exemption cannot be claimed. This may cause unnecessary difficulty to property owners for events they cannot control, such as delays.

Under such circumstances, judicial courts come up with a liberal interpretation of the construction date. This is a beneficial provision for taxpayers and needs to be followed properly. The objective of the legislature, perhaps, was to foster greater interest in investments while acquiring a residential property.

If the property is sold off, and the person gets long-term capital gains, then the person is eligible for an exemption on the gains if it is re-invested in a residential property. The interim budget made it clear than an exemption can be attained once in a lifetime on long-term gains as long as the figure is 2 crore or less.