| Question And Answer | |
|---|---|
| Subject: | Capital Gains on redeveloped property |
| Category: | Income-Tax |
| Querist: | Parthiv |
| Answered by: | Law Intern |
| Tags: | Capital Gains, indexation |
| Date: | August 24, 2025 |
Capital gains exemption u/s 54 issue
Facts of the case
- Purchase price (resale property) of property – 25 Lacs
- Year of purchase – Jan 2010
- Stamp duty / registration – 1.1 Lacs
- Other cost of acquisition (brokerage / civil interiors etc) – 1.4 lacs
Approx Cost of acquisition: 27.5 lacs (448 sq ft)
Redevelopment undertaken in FY 21-22
- PAAA signed and stamp duty / registration paid for addl area – Feb, 2022
- Additional area allotted – 95 sq ft
- Additional area purchased – 75 sq ft @ 16,000/sqft registration value – 13.4 Lacs (incl GST, stamp duty & registration)
- Possession received in Sept 15, 2024
Total area (448+95+75) = 618 (possession recd in October, 24)
| Details | Amount (approx) |
| ICA for property acquired in Jan 2010 (448 sq ft, details above) (376/148) | 70.0 lacs |
| Additional area allotted (95 sq ft) | – |
| Additional area purchased (75 sq ft) | 13.4 lacs |
| Cost of redeveloped prop | 83.4 lacs |
Questions
- What is the ICA of redeveloped prop and would it tantamount to LTCG if I sell the prop in FY26?
- Will the entire proceeds be exempt u/s 54 if the CG is reinvested in a new property worth, say, 1.8cr? If not, what is the min holding period of the redeveloped property for it to become eligible for exemption u/s 54? i.e. no LTCG / STCG payable.
- Should I disclose anything in ITR for AY25-26? The new property is unsold till date.
(i) We can also index the cost of the additional property acquired in FY 2021-22. If so, the total ICA will be ₹85.90 lakh.
(ii) Yes. All components (original, allotted, and purchased areas) have a holding period exceeding 24 months by FY 2025-26. So, the gain will be assessable as LTCG.
(iii) Yes. Section 54 exemption is available if the new property is purchased within 1 year before or 2 years after the sale or constructed within 3 years after the sale. The new asset must be held for 3 years from date of purchase or construction.
(iv) The asset will have to disclosed in Schedule AL of the ITR. There is no capital gains to offer as the asset is unsold.