Eleanor Finch
The date of purchase of a property in India is a complex issue, with various dates such as advance payment, allotment letter, agreement, construction completion, and possession coming into play. The date of acquisition of a property is important for tax purposes, particularly when it comes to capital gains tax exemptions. In the Hindu tradition, it is considered auspicious to purchase property on certain dates, and it is believed that doing so brings luck and prosperity.
| Characteristics | Values |
|---|---|
| Date of purchase | The date of agreement, not the date of registration |
| Date of acquisition | The date of allotment, date of registration, or date of possession |
| Tax exemption | Claim a deduction from capital gains income tax when selling a property if the seller purchases or constructs another residential property within a specified timeframe |
| Auspicious dates | Thursdays and Fridays, as per Hindu beliefs |
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What You'll Learn
Date of agreement vs date of registration
The date of agreement and the date of registration are two important milestones in the process of purchasing a property in India. While the former marks the signing of the Agreement to Sell (ATS), the latter involves the legal transfer of ownership at the sub-registrar's office. Understanding the distinction between these dates is crucial, especially when determining the acquisition date for tax purposes.
Date of Agreement
The date of agreement, also known as the ATS sign date, is when the buyer and seller sign the Agreement to Sell. This document outlines the terms and conditions of the sale and is a legally binding contract. While the Indian Registration Act of 1908 requires the registration of sale deeds for transactions involving immovable property valued at more than Rs. 100, it does not mandate the registration of the Agreement to Sell. This means that the Agreement to Sell can be enforceable in law even without registration. However, it is important to note that an unregistered sale agreement is typically valid for only three years from the execution date.
Date of Registration
The date of registration, also known as the actual transfer date, is when the legal transfer of ownership takes place. This process involves registering the property under the buyer's name at the sub-registrar's office. The registration process typically includes submitting various documents, such as the property card, original documents, and payment proof of stamp duty. The sub-registrar verifies the payment of stamp duty, which is a tax paid to the government for obtaining legal ownership of the property. It is important to note that property registration is mandatory in India, and only after registration, one becomes the legal owner of the property.
Determining the Acquisition Date for Tax Purposes
When it comes to determining the acquisition date for tax purposes, such as capital gains tax exemption under Section 54 of the Income Tax Act, the distinction between the date of agreement and the date of registration becomes crucial. While the date of agreement represents the intention to purchase the property, the date of registration signifies the actual transfer of ownership. In some cases, there may be a significant time gap between these two dates due to various factors, such as construction timelines or payment schedules.
According to judicial pronouncements, the relevant date for determining the acquisition date is when the full consideration amount is paid, and possession of the property is obtained. This date may or may not coincide with the date of agreement or the date of registration, depending on the specific circumstances of the transaction. Therefore, it is essential to refer to judicial decisions and seek professional advice when determining the acquisition date for tax purposes.
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Income tax implications
When it comes to the income tax implications of property purchase in India, there are a few key things to keep in mind. The date of purchase is significant as it determines whether the gains on the sale of the property are classified as long-term capital gains (LTCG) or short-term capital gains (STCG). If a property is sold after being held for more than 24 months, the profit is considered LTCG, while a sale within 24 months of acquisition is classified as STCG.
For Non-Resident Indians (NRIs), LTCG is taxed at a flat rate of 12.5% without the indexation benefit or 20% with the indexation benefit. On the other hand, STCG is taxed at the applicable income tax slab rates, which can vary depending on the individual's income tax bracket. It's important to note that these tax implications also apply to inherited properties, and the date of purchase of the original owner should be considered when calculating LTCG or STCG.
When an NRI sells property in India, the buyer is responsible for deducting Tax Deducted at Source (TDS). The standard TDS rate for NRI property sales is 20%. However, if the property is sold before the completion of two years from the date of purchase, the TDS rate increases to 30%. The buyer must obtain a Tax Deduction Account Number (TAN) and deposit the deducted TDS amount with the Income Tax Department within the specified timeframe.
To reduce the tax burden, NRIs can claim exemptions on LTCG from the sale of house property under Section 54 of the Income Tax Act. This exemption allows NRIs to invest their capital gains in the purchase or construction of a new property within specific timeframes. It's important to note that the exemption may be revoked if the new property is sold within three years of acquisition. Additionally, the capital gains must be invested in a single property and cannot be distributed across multiple properties.
Lastly, when dealing with the sale of property, it's important to understand the complexities of capital gains tax calculations. The gain or loss arising from the sale is calculated by considering factors such as the cost of purchase, improvement costs, and expenses incurred in connection with the sale. Online tax calculators and platforms can assist in determining the exact tax liability.
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Astrological auspiciousness
Astrology plays a significant role in Indian culture, and many people believe that the position of planets in one's horoscope can influence significant decisions and events, including property purchases. Here are some insights into the astrological auspiciousness for purchasing property in India:
Planetary Influences and House Rulers:
The position of planets in one's horoscope is believed to impact the ability to purchase property. The fourth house in astrology is associated with property matters. If the ruler of the fourth house is in your fourth house, and the ascendant planet is influenced by a benefic planet, it is considered favourable for property purchases. This configuration is said to bring full benefits and enjoyment from acquiring property.
On the other hand, certain planetary placements can indicate potential challenges or losses related to property. For instance, if the fourth house ruler is found in the third house with other unfavourable planetary positions, it may suggest property loss. If the ruler of the fourth house is in the sixth, eighth, or twelfth houses, affecting the ruler of the lagna, it could result in property loss due to governmental action. Therefore, consulting an astrologer to understand these influences is essential.
Auspicious Days and Nakshatras:
According to Vastu and astrology, Thursdays and Fridays are considered the most auspicious weekdays for property registration in India. These days are linked with prosperity and good fortune. Additionally, specific nakshatras (lunar mansions) are deemed highly auspicious for property-related activities. For instance:
- Revati nakshatra is known for bringing peace, prosperity, and success.
- Anuradha nakshatra symbolises stability, comfort, and good fortune.
- Mrigashirsha nakshatra is associated with prosperity and happiness.
- Purva Bhadrapada nakshatra is linked to progress and material gains.
- Vishakha nakshatra represents victory and achievement.
Aligning property registration with these auspicious days and nakshatras is believed to ensure smooth transactions, long-term success, and overall prosperity and joy.
Griha Pravesh and Adhik Maas:
In India, the Griha Pravesh ceremony, or housewarming, is considered essential for a new home. Performing this pooja is believed to fill the new home with positive energy and happiness. The auspicious Muhurat dates for Griha Pravesh can be found in the Hindu Marriage Calendar, based on nakshatra, weekday, tithi, and lunar month shuddhi.
On the other hand, Adhik Maas, a lunar month that occurs once in 32 months, is traditionally considered inauspicious for new ventures like property purchases. It is advisable to avoid property-related activities during this time.
In conclusion, when considering property purchases in India, many individuals seek astrological guidance to align their decisions with auspicious timings and planetary configurations. By examining one's horoscope and consulting experts, individuals can make informed choices regarding their property investments, ensuring prosperity and positive outcomes.
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Date of possession
The date of possession is one of the factors that determine the acquisition date of a property. The acquisition date is important in the context of capital gain tax exemption under Section 54 of the Income Tax Act.
The date of possession is the date when the owner obtains possession of the property. This date may be different from the date of agreement or the date of registration. In the case of Sanjeev Lal v CIT (2014), the Hon'ble Supreme Court of India held that the agreement to purchase is considered the date on which the property was acquired (transferred). However, in the case of Rajiv Madhok v ACIT (2020), the Delhi Tribunal held that the relevant date is when the petitioner paid the full consideration amount and obtained possession of the property.
The date of possession is also relevant in determining the completion of the construction timeline for capital gain tax exemption. In the case of Smt. Shashi Varma v. CIT, the Hon'ble High Court of Madhya Pradesh held that the requirement of Sections 54 and 54F is for the assessee to purchase a new asset within the stipulated period or construct a residential house within three years from the date of transfer. Therefore, the date of possession can impact the eligibility for capital gain tax exemption.
In addition to legal and tax considerations, the date of possession is also significant in the cultural context of India. According to Hindu beliefs, purchasing or registering property is a significant event and is considered auspicious if carried out on certain dates and times, known as Shubh Muhurat. Thursdays and Fridays are considered the most auspicious weekdays for property purchases, and there are specific Nakshatras (moon mansions) that are believed to bring happiness and positivity to the property owner.
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Date of advance payment
In India, the date of acquisition of a property is a complex issue, with various dates such as advance payment, allotment letter, agreement, construction completion, and possession coming into play. The date of advance payment is not considered the date of transfer of property. The date of acquisition is determined by the date of allotment, registration, or possession.
In the case of a ready-to-move-in house, the date of the sale agreement is considered the date of purchase. However, for an under-construction property, the date of purchase is the date of allotment or possession, depending on whether specific units are allotted. The income tax department may consider the date of possession as the date of purchase, as before possession, the buyer only has a right to the property, which gets converted into a proper right after possession.
The date of acquisition is important for capital gains tax purposes. Section 54 of the Income Tax Act allows taxpayers to claim a deduction from capital gains income tax when selling a property if they purchase another residential property within a specified timeframe. This timeframe is typically within one year before or two/three years after the date of transfer of the original house sold.
Additionally, in Hindu tradition, it is considered auspicious to purchase property on certain dates and days, with Thursdays and Fridays being the most favourable. Property purchase decisions are also influenced by astrology, with the Lagna and Nakshatra playing a role in determining the most favourable time to buy property.
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Frequently asked questions
The date of acquisition of a property is the date on which the property is acquired or transferred. This date may be the date of agreement, the date of registration, or the date of possession.
The purchase date of a property is the date on which the sale agreement is signed. This date may also be referred to as the transfer date.
In Hindu tradition, it is considered auspicious to purchase property on Thursdays and Fridays. It is believed that buying a property on an auspicious date brings luck, prosperity, and wealth.
The date of purchase for tax purposes is usually the date on which the full consideration amount is paid and possession of the property is obtained. This date may be different from the date of agreement or the date of registration.
