Q.833 Date of purchase or date

of possession to calculate capital

gain

Question: Dear Sir / Madam, I read one of your post, where the above e-mail was provided and an offer to answer any Questions... I would appreciate your help. My Qs are listed below. Kind regards. Pushpa 1. For an Investment made in a Property under construction, what would be the date of Purchase? Date of the initial payment, date of the last payment, date of registration with the Indian authority and payment of fees and taxes, date the construction is completed, the date of possession? 2. What would be the date of Purchase, if it is sold without taking the possession? 3. Can one sell the property after the construction is completed without taking the possession? 4. If the date of the first payment, (for a property under construction) and the date of sale are at least 3 years apart, would indexation be allowed? 5. Should each cost be indexed separately as it may be paid in several installments? 6. When calculating the US Capital Gains, can the loss on currency conversion be offset against the gain? [January 6, 2016] Answer: Generally the process of buying under construction property in India from a builder involves: • A token deposit amount when price and other terms of completion are mutually agreeable. • After receiving a deposit, the builder would generally issue a ‘Letter of Allotment’ o Letter of Allotment is basically a document issued by the builder to the buyer. This spells out the details of the property being purchased and the amount to be paid. While format of Letter of Allotment may vary amongst various builders, see a sample at the end of this page: Regarding your questions: 1. & 2. Date of letter of allotment can considered to be the purchase date. 3. To sell a property that is still under construction or without taking possession, the original buyer would have to seek the cooperation of the property developer/builder and enter into a three- way agreement between the original purchaser, the builder and the new buyer. 4. Letter of Allotment carries more weight than date of first payment. 5. Indexing is generally based on year of allotment letter and price of property. If several years lapse before registration, then stamp duty and registration charges etc. can be indexed in year of actual payment. Speak to an accountant for clarification and guidance. 6. Capital gain/loss in Indian Rupee is converted US$ when filling US taxes. The information provided on this website is not meant to replace professional advice on tax/accounting matters. Kindly consult a chartered accountant or tax professional in your area.