Date of Purchase for LTCG/STCG

Date of Purchase for Under-Construction Bengaluru Apartment: Capital Gains Tax Calculation

For the purpose of capital gains tax calculation in India, specifically regarding under-construction apartments (such as those in Bengaluru), the "date of purchase" is typically considered to be the date of allotment letter issued by the builder or, in some cases, the date when the buyer obtains a right to the property through the allotment.

Key Points

• Date of Allotment: Legal precedents have clarified that the date of allotment, i.e., when the builder issues an allotment letter and the buyer secures rights over the apartment, is considered the date of acquisition or purchase for capital gains calculations. Payments, agreement to sell, or later possession dates do not supersede this.

• Why Not Possession Date? The date of possession or actual handover of the apartment is typically not considered the "date of purchase" for capital gains tax purposes. Courts and tribunals have repeatedly ruled that the rights are created when the allotment occurs, not when possession is taken.

• Capital Gains Holding Period: The holding period (to distinguish between short-term and long-term capital gains) starts from the date of allotment of the under-construction unit and not from the possession date or registration date of the sale deed.

• Legal Reference: Several case laws, such as the Bombay High Court in PCIT vs. Vembu Vaidyanathan (2019) and consistent positions by tribunals, confirm this approach.

• Section 54/54F Nuances: For exemption claims under Section 54/54F, investment in an under-construction property is treated as "construction" and not "purchase", but the date of allotment is key for determining the start of the holding period.

Practical Example

If you booked an under-construction flat in Bengaluru, paid the booking amount, and received an allotment letter from the builder on June 5, 2022, but took possession in August 2025, the relevant "date of purchase" for capital gains calculation is June 5, 2022 (the allotment date).

This date is crucial for determining the holding period (to assess if the capital gain is short-term or long-term) and for the purposes of various exemptions available under the Income Tax Act.

Note: While judicial precedents and guidelines align across India, local variations in practice are rare but possible, so always consult with a qualified tax professional for specific circumstances.