I purchased a flat in Ghaziabad, Uttar Pradesh, in 2011 for which I took a home loan. I have booked another flat in Ghaziabad which is yet to be registered. I hope to get possession of the second flat by March 2017. I am planning to take a home loan on the second house too. Once I shift to the new flat, I plan to sell off my old flat. Can I use capital gains from the first house to prepay my home loan that I intend to take for the second house?
- Swati Jain The capital gain on your existing Ghaziabad flat will be calculated on the sale price minus the indexed cost of acquisition. Assuming the existing house in Ghaziabad that was bought any time after April 1, 2011, the indexed cost will be 1.43 times the original cost (i.e index value of 1125 for financial year 2016-17 divided by index value of 785 in financial year 2011-12). Let’s assume that the purchase date of the new Ghaziabad flat is within one year before the date of sale of the existing Ghaziabad flat. If so, then if the cost incurred on purchasing the new Ghaziabad flat is higher than or equal to the capital gain as calculated above, it will not matter whether you use the sales proceeds of the old flat to pay the builder or to pay off the home loan.
In either case, you should be able to claim exemption on the capital gains I have chosen to buy a flat in a city in Maharashtra and have paid 20% of purchase value to the builder. The deal amount is decided and agreed. The flat will be ready for possession in June-2017. The builder has asked me to register the agreement any date before possession. Considering the GST coming into force in April next year, which would be the best period do you think (before or after GST coming into force) to register an agreement? I want to save on paying service taxes. - Pankaj Mathur The exact regulations or even the tax rates of GST or the date of its implementation are still far from clear so it is not possible to answer your question with certainty. But it is very unlikely that GST rate will lead to any savings over service tax rates.
In any case leaving a property unregistered is extremely risky as far as your title to the property is concerned. You should be much more concerned about the safety of your basic investment rather than trying to save on taxes (which in any case is not likely in this case). So, from all accounts I would advise you that it is much better for you to register the property immediately. I’m planning to buy a house in my wife’s name. She is a housewife with no source of income. How will the Benami Property Amendment Act affect my purchase transaction and after-purchase transactions?
- Rakesh Sharma The Benami Transaction (Prohibition) Amendment Act does not affect property bought in the name of the spouse. This applies as long as the consideration for such property has been paid out of the known source of such an individual.