I bought my second flat in 1996-97 for Rs3.5 lakh. In 2009-2010, I purchased another flat for Rs28 lakh and am yet to get the possession of this third property. To make the payment for the third flat, I sold my second flat for Rs14 lakh in 2010-11. Am I liable to pay any long-term capital gains tax?

Ketan Mehta

As per section 45 of the Income-tax Act, any profit arising from the transfer of a capital asset shall be chargeable to tax under the head “capital gains". Since you have sold the flat, you are required to pay tax on capital gains on such a transaction and since the flat has been held by you for at least three years, the flat is a long-term capital asset on which long-term capital gains tax has to be paid at 20%. The tax is calculated by deducting the indexed cost of acquisition from the sale proceeds.

I may further add that subject to fulfilment of certain conditions, you may also be entitled to benefit under section 54 of the Act as you have purchased another flat. Based on the exact dates of purchase and sale if the benefit of section 54 is available to you, then no capital gains tax would be payable.

Is it possible to claim stamp duty under section 80C for an under-construction flat. The registration will happen now but the possession will be given after two years?


As per Section 80C(2)(xviii)(d) of the Income-tax Act, deduction of stamp duty, registration fee and other expenses for the purpose of transfer of house property is allowed only if the same is for the purpose of purchase or construction of a residential house. The income from such property is chargeable to tax under the head “income from house property".

Since your flat is under construction and no income is chargeable to tax under the head “income from house property", no deduction should be allowed on the stamp duty paid.

I have a house of my own where I reside. Last year, I purchased an apartment on home loan. I have rented out this property. Can I claim loss of income for the interest paid on my home loan which can partially offset the rental income accrued against this property? Are there any limits for this loss?

—R. Subramaniam

According to section 24 of the Income-tax Act, you would be entitled to set off the interest paid to the bank against rental income from the apartment. There is no limit up to which the interest can be set off if the property is on rent. If the property is self-occupied, then there is a ceiling up to Rs1.50 lakh.

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