Taxability LTCG or STCG where property allotment, possession, and conveyance happen in different years
📘 Title: Long-Term or
Short-Term Capital Gain? A Deep Dive into Real Estate Taxation with Allotment,
Possession & Sale Dates
🧾 By CA Bhavesh
Panpaliya | +91 8888755557
🔍 Introduction
One of the most debated issues in real estate taxation is
the determination of the holding period for capital gains. Especially in
cases where property allotment, possession, and conveyance happen in different
years, taxability under Long-Term Capital Gains (LTCG) or Short-Term
Capital Gains (STCG) becomes confusing for many.
Let us understand this with a real-life styled case, backed
by legal provisions and judicial precedents.
🧱 Scenario in Focus
A flat buyer has the following timeline:
- Allotment
Letter: Received in 2010 from the builder.
- Possession
of Property: Taken in 2018.
- Conveyance
Deed Executed: In 2024.
- Sale
of Property: In 2025.
Question: Will the gain be taxed as Long-Term Capital
Gain (LTCG) or Short-Term Capital Gain (STCG)?
⚖️ Legal Framework – Section
2(42A) of the Income Tax Act, 1961
The key to determining LTCG or STCG lies in Section
2(42A):
If a capital asset is held for more than 24 months
immediately before the date of transfer, the gain arising is treated as Long-Term
Capital Gain.
But here's the complexity — what is the actual "date
of acquisition" of the property?
📚 Judicial Precedents:
Holding Period Starts from Allotment, Not Possession or Conveyance
Numerous court rulings clarify that the date of allotment
is crucial for determining the period of holding.
✅ Key Case Laws:
- CIT
v. K. Ramakrishnan (Kerala HC, 2013)
- Held
that date of allotment is to be considered as the date of
acquisition of the property.
- ACIT
v. Sanjay Kumath (ITAT Indore, 2021)
- The
taxpayer received allotment in 2005, possession in 2009, sale in 2011 →
LTCG allowed based on the allotment date.
- Vinod
Kumar Jain v. CIT (P&H HC, 2012)
- Even
if possession was given much later, date of allotment is relevant.
📌 CBDT Circular No. 471
(dated 15.10.1986) & Circular No. 672 (dated 16.12.1993):
These circulars clearly state that allotment of flat
under a housing scheme confers rights in the property and is considered
as acquisition.
🔍 Application to Our Case
- Allotment:
2010
- Sale:
2025
- Holding
Period = 15 years
✅ As the asset is held for more
than 24 months from the allotment date, the gain will be treated as Long-Term
Capital Gain (LTCG), irrespective of the possession or conveyance
dates.
📊 Capital Gains
Calculation Example
Let’s assume:
- Allotment
Price in 2010: ₹30 lakhs
- Indexed
Cost (using CII from 2010 to 2025): ₹30 lakhs × (348/167) = ₹62.5 lakhs
- Sale
Price in 2025: ₹90 lakhs
LTCG = ₹90 lakhs – ₹62.5 lakhs = ₹27.5 lakhs
✅ Taxable @ 20% with indexation
benefit now after 23/07/24 no indexation available LTCG (90-30=60) and tax 12.5% i.e.750000
✅
Eligible for exemptions u/s 54, 54EC, 54F if reinvested
💼 Professional Advice:
If you're selling a property acquired via allotment from a
builder or authority, keep the allotment letter safe — it's the most
crucial document to prove the holding period for LTCG eligibility.
Also, note:
- Registration
or possession dates DO NOT affect LTCG classification.
- Conveyance
deed delay does not change the “date of acquisition” for tax purposes.
🚨 Beware: Exceptions Can
Arise
- In
case of transfer of allotment rights before possession, tax
treatment may differ.
- If
allotment rights are sold before registration and no possession is taken,
it may be taxed as capital gains on rights, not immovable property.
✅ Conclusion
In our case, since the flat was allotted in 2010 and sold
in 2025, the gain is long-term in nature. The date of possession
(2018) and conveyance (2024) do not alter the period of holding for
capital gains computation.
👉 Always consult CA with allotment and sale documents before
filing returns or claiming exemption.
📌 Need help in
calculating capital gains tax or planning exemptions?
📞
Contact: CA Bhavesh Panpaliya – 8888755557