What is holding period of under construction property?
May 27, 2017 Home Trading Steps
Brought a property solely for investment purpose? There are a number of calculations and taxes that need to be paid. When you decide to sell the said property, holding period comes into light. Holding period helps in deciding the tax benefit in long term capital gains.
What is holding period and its importance?
The time period for which you hold the property is called as holding period. Short term and long term help in defining the tax gains for the property. Earlier the holding period was three years but it has been changed to two years as announced by the Finance Minister Arun Jaitley in his Budget 2017 speech.
As an investor, holding the property for at least two years before it gives you good returns and tax benefits is required. When you sell off the said property you reap some benefits on indexation, 20 percent concession rate and tax saving instruments by investing in another property.
How is the holding period calculated?
There are some ambiguities when it comes to holding properties of the under construction properties. The biggest and the most important question arises that whether to calculate it from the date or purchase or possession. There have been certain judicial proceedings which have given the verdict based on the case but there has been no solid confirmation.
In one of the cases, the high court gave the decision that the holding period of the flats allotted by the Delhi Development Authority will be from the counted from the day of allotment. Central Board of Direct Taxes issued a rule that under the self financing schemes of DDA, the holding period will commence from the day of allotment. While in another case Bombay high court gave a rule that the holding period will start from the day of possession in lieu of the tenancy rights.
However, recently Bombay high court gave the rule that in case of under construction properties, the holding period for the under construction properties will commence from the date of allotment and if the buyers decide to sell the property after 24 months, it will be considered as a long term capital.
Some important things for the buyers:
1. If you are planning to sell the under construction property, sell it before the possession of the property.
2. Be aware of the terms and conditions of the property. They differ from builder to builder.
3. To save from the taxes after selling off the property, invest it in another property.
What is holding period and its importance?
The time period for which you hold the property is called as holding period. Short term and long term help in defining the tax gains for the property. Earlier the holding period was three years but it has been changed to two years as announced by the Finance Minister Arun Jaitley in his Budget 2017 speech.
As an investor, holding the property for at least two years before it gives you good returns and tax benefits is required. When you sell off the said property you reap some benefits on indexation, 20 percent concession rate and tax saving instruments by investing in another property.
How is the holding period calculated?
There are some ambiguities when it comes to holding properties of the under construction properties. The biggest and the most important question arises that whether to calculate it from the date or purchase or possession. There have been certain judicial proceedings which have given the verdict based on the case but there has been no solid confirmation.
In one of the cases, the high court gave the decision that the holding period of the flats allotted by the Delhi Development Authority will be from the counted from the day of allotment. Central Board of Direct Taxes issued a rule that under the self financing schemes of DDA, the holding period will commence from the day of allotment. While in another case Bombay high court gave a rule that the holding period will start from the day of possession in lieu of the tenancy rights.
However, recently Bombay high court gave the rule that in case of under construction properties, the holding period for the under construction properties will commence from the date of allotment and if the buyers decide to sell the property after 24 months, it will be considered as a long term capital.
Some important things for the buyers:
1. If you are planning to sell the under construction property, sell it before the possession of the property.
2. Be aware of the terms and conditions of the property. They differ from builder to builder.
3. To save from the taxes after selling off the property, invest it in another property.
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