Home >Money >Q&a >I want to sell flat before taking possession. How to save income tax

I had booked one residential flat in December 2017. I wish to sell the same before taking the possession. How can I save my tax liability on such sale?-Name withheld on request

In case you sell an under-construction property before possession, the profits made on such sale will be taxed as short-term capital gains or long-term capital gains depending on the time interval booking date and the date when you actually sell your right in the under-construction property.

In case the interval is not more than 36 months, the profits made shall be treated as short term capital gains and shall be added to your regular income which will then get taxed at the slab rate applicable to your regular income.

Since you are planning to sell it after 36 months the profits shall be taxed as long term capital gains. You can avail the befits of exemptions available for investing in another house under Section 54F and not 54 for which you will have to invest the net sale consideration instead of indexed long term capital gains which is available in case of sale of a residential house.

Read Also: Recovery of residential sector may take longer: Icra

Whether you are selling a residential house or a right to acquire a property is a debatable issue but in my opinion what you are selling is your rights to acquire a property and not the property itself.

So the higher holding period requirement will apply and also you also can not avail the tax exemption under Section 54EC which is available only in respect of long term capital gains on sale of land or building and what you are selling is neither of it.

The cost for the purpose of capital gains shall include the amounts paid by you to the builder over the period as well as the stamp duty and registration charges however since this is long term asset, you will also be entitled to get your cost indexed with the help of cost inflation index of the year of booking and the year of sale.

Balwant Jain is a tax and investment expert and can be reached on

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