I am 51 years and reside in Shivamogga. I sold my apartment in September 2014 after holding it for more than 3 years after possession. I then booked an under construction flat to save on long term capital gains tax. If the builder does not offer me possession of the new flat within 3 years which will be complete in FY 2017-18, would I have to pay tax on the long term capital gains I saved 3 years ago?
If you sell a property after two years, the profit is treated as long-term capital gains and taxed at 20% after indexation. You can get the exemption from long-term capital gains under Section 54 if you purchase/construct a new house/apartment. The tax exemption is only up to the extent of your LTCG: The time limit for purchase of a new flat is two years and the time limit for construction of new flat is three years from the date of transfer of the original flat to avail deduction under Section 54. You have paid a booking amount to the builder and this is considered as you constructing the flat. If you make the full payment to the builder under the agreement within a period of 3 years, and if it has a provision of handing possession before September 2017, you can claim Section 54 deduction even if the builder does not fulfill his obligations. If you don't fulfill these conditions you will have to pay tax on long term capital gain in AY 2018-19 (Financial Year 2017-18).