Got a flat in redeveloped building against tenancy rights. When can I sell it?

When can a tenant, who has acquired a flat in redeveloped building against his tenancy right, sell it? 

Section 54F grants exemption for long term capital gains on sale of any long term asset other than a residential house if the sale proceeds are invested for acquiring a residential house property. In case of redevelopment the owner of the property is supposed to have reinvested the sale proceeds for acquiring a residential house in the redeveloped property and thus eligible for exemption under Section 54F. I presume your tenancy right was a long term asset as per the income tax laws at the time of redevelopment. The exemption under Section 54F is deemed to have been granted even if you have not filed your ITR.

One of the condition for exemption under Section 54F is that the new residential in respect of which exemption under Section 54F is claimed should not be transferred within a period of three years else the exemption claimed earlier become taxable as capital gains in the year in which the new residential house is transferred. For the purpose of computing capital gains the cost of the flat in the developed building will be the fair market value of the flat when the possession is obtained and any excess realised over its fair market value will be taxed as long term capital gains if sold after two year as the holding requirement for treating any asset as long term is more than 24 months for land and building. However, in order to avoid reversal of capital gains exemption availed under section 54F earlier, you will have to wait for 36 months before the same can be sold.

Balwant Jain is a tax and investment expert and can be reached on [email protected] [email protected] on Twitter

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