Hi All,

We own an apartment in Hyderabad. Actually we got the sale deed done for the apartment sometime in Feb 2006. But initial saledeed was done in Feb 2004. Now we are planning to sell the apartment. We are NRIs. Wanted to know how the actual holding period is calculated.

Also will it be a Short term or Long term investment?

Any help will be greatly appreciated.

Thanks,
Prayam.
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  • Hi Prayam!

    I just know that holding period refers to time period a property is held by its owner and it helps to calculate whether a gain or loss is considered short term or long term.

    I'm also interested to know how to calculate it...If you get the answer, please share it here as well.

    Thanks :)
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  • capital gains

    hi,
    if any property is held for more than 36 months from the date of purchase and later sold its considered long term holding and if its less than 36 mnths from the date of purchase its considered short term holding but these are for taxation purpose only.
    hope this helps
    Vinod
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  • Hi
    I think capital gain short term and long term also depend upon the possession of the property. when u got the possession.
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  • The inputs given above are all currect. Let me sum up the tax provisions on real estate sales for everybody's benfit:

    1.Any property purchased and sold would lead to a profit/loss, and a profit would be taxed.

    2.Rate of tax depends on whether the profit is classified as "short term " or "long term"
    3. Any property sold within 36 months from date of POSESSION is classified as short term capital gain (profit).This would be added to your current years income and taxed as per the various slabs notified in the annual budget. In other words, if you are in the highest tax bracket already, you would end up paying 32% of your profit as tax.

    4.If the property has been sold after being held for more than 36 months, the profit is classified as longterm capital gain.The rules for long term capital gain are as under:

    a. The cost of acqusition of the house can be indexed up based on the inflation index notified by the RBI. So a house which you bought for 20 lakhs can now be shown as having cost 25, or 30 lakhs by applying the RBI notfied index. This reduces the deemed profit that is liable to tax.

    b. Once you have calculated the profit(after indexation), you can either pay tax at 20% of the deemed profitor take one of the following actions to save tax:
    1. Reinvest the profit in another property. Any money deployed within a pd of one year before the sale of the first house, and upto a pd of 3 years after can be shown as reinvestment in property in which case the part of te profit that has been reinvested is not taxed. Pls note that mere reinvestment in a house within 3 yrs is not sufficient. You should have taken posession(obtained completion cert in case of an indep house ) within this pd of 3 yrs. In case you have recd the sale proceeds but have not identified a property that you want to reinvest it in then park the money in a capital gains acct with a scheduled bank.

    2. Alternatively, you may invest the entire sale proceeds in a capital gains instrument which gives benefit under Section 54 E of The Income tax act (Spk to your broker or tax advisor to get a list of such instruments- they are commonly available.) This would have a lock in pd of 3 yrs(not very sure, check if it is 3 yrs or less)

    3. In case you do not want to invest the entire sale proceeds in a capital gains instrument then you may invest only the profit in a similar instrument. This would however carry a lock in pd of 5 yrs. ( check the lock in pd again)


    Pls note that all these benefits of indexation, caitall gains instruments etc are available only in case of long term capital gains. For short term capital gains you just have to share the spoils with the taxman.

    To answer the original question - since the sale deed was registered ion 2004, you can assume that the pd of 36 months finishes sometime in 2007. Any sale after that can be only bring in long term capital gains. But it would be prudent to take the opinion of a tax consultant/CA to be on the safe side.

    Hope this has been of help

    Regards,
    Karti
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  • Thanks Karti for the info.
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