Can LTCG claims be reversed/penalized?

I offered one in all my inherited homes in February 2019. After adjusting for the indexation price, I invested the capital good points in one other residential property, a ready-to-move builder residence, on 8 July 2019 and obtained possession of the identical in November 2019. In October 2019, I filed my ITR for FY 2018-19 whereby I declared the date and value of the property offered and that of the newly acquired one. I additionally claimed the advantages of LTCG below part 54. The date of the newly acquired property, as given within the ITR, is 8 July 2019. Now, resulting from some causes, I wish to promote this residence and instantly make investments the proceeds in one other residential plot or a built-up home.

My queries are:

1. If I promote my residence now, will my LTCG declare below part 54 in AY2019 be reversed? Will I’ve to pay penalty if I promote the property inside three years of buying it or possession? I’ve a legitimate motive for making an attempt to promote it because the property shouldn’t be of fine requirements and the builder shouldn’t be facilitating its registry.

2. Since the LTCG interval on residential property has now been decreased to 24 months, will this not apply to my acquired property in 2019—even when I reinvest in one other residential property instantly?

3. Whatever the interval of holding—24 months or 36 months, is it calculated from date of buy or reserving or precise date of possession or from the beginning of a monetary 12 months. In my case, the date of buy is 8 July 2019, the precise date of possession is finish of November 2019 however in ITR the date of possession talked about is 8 July 2019 and the FY date will probably be 1 April 2019.

-Namewithheld as per request

As per Section 54 of the Income-tax Act, 1961 (the Act), there aren’t any prescribed provisions whereby the exemption claimed below this part is revoked if the acquired new property is offered inside a selected time period.

Accordingly, no matter whenever you promote the brand new property acquired by you in 2019, the exemption claimed by you in FY 2018-19 shall not be revoked. Further, there shall not be any penalty. However, the place the brand new property is offered inside a interval of three years from the date of its acquisition, the price of this new property for the aim of computing capital good points on its sale, shall be decreased by the capital good points claimed as exempt earlier.

Further, the place a residential property is held by a person for greater than 24 months instantly previous the date of switch, any capital acquire arising from switch of such property is taken into account as Long Term Capital Gains (LTCG).

Else the acquire arising from switch of such property shall be thought-about as Short Term Capital Gains (STCG).

There aren’t any particular provisions below the Act, which specify what must be thought-about because the date of acquisition. At the identical time there are numerous conflicting judicial precedents on this regard as properly.

Based on the overall ideas and precedents, there’s a view that the date of acquisition could also be thought-about because the date on which you’ve gotten obtained an unfettered proper/ possession of the property and never from the date of reserving of the property.

In case such proper is obtained on the date of possession of the property in November 2019, the holding interval of 24 months could also be thought-about from such date of possession. However, this may depend upon the particular info and documentation in your case. Any influence of the date of acquisition on the sooner exemption claimed below Section 54, has not been examined.

Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.

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