I have booked a flat in an under construction project and the possession is December 2027. Can I sell my existing old flat now or I have to wait for another year ( 3 years before the possession of the new flat) for taxation benefit.

Ans: Hi,

I am presuming that you want to clarify if the capital gain tax be avoided if the reinvestment of old 1BHK flat sale could be mapped against purchase of 2 BHK flat.

The reinvestment conditions specify that you could off-set the capital gain arising out of sale of a residential property by purchasing or constructing a new house within the stipulated timeframes.

If you have bought a ready possession property (new flat) then the timelines are 1 year back or 2 years forward from the date of sale of the old flat.

If you have bought an under construction flat then the timelines are 3 years forward from the date of sale of the old property.

An example would be as follows:

Purchase of 2BHK flat is say June 1, 2022 and date of sale of 1BHK is say May 1, 2023 - You could map the capital gains from 1BHK against the purchase of 2BHK ready possession flat. Similarly, if the purchase of the 2BHK flat was at anytime after May 1, 2023 but within 2 years from this date, then again the exemption would be allowed.

In the case of under construction property, all payments made to the builder after May 1, 2023 would be allowed upto a period of 3 years

Ans: In order to claim capital gains tax deduction, one needs to buy a house one year prior or two years after selling the house OR construct the house three years after selling the house. In facts of your case, it looks to difficult to claim such a deduction. However, you can invest in bonds to get the exemption which may not serve your purpose but atleast you can obtain deduction.

Please take assistance of your CA in this regards as well.