Can builder increase super area of flat?

 S. C. Vasudeva

Q.I had booked a studio apartment in 2010 having approx. 628 sq. ft super area. The possession was schedule to be handed over in April 2012, but the builder failed to deliver the apartment till 2015. Now after three years he is offering possession but with increase in super area (660 sq. ft) and is asking for extra Rs 78,980. My queries are: 

Can he increase the super area like this?

Would he be liable to pay extra for delay in project as mentioned in agreement. According to the sale document the builder will have to pay Rs 5 per sq. ft for the delay in offering possession. — Amit Bhatia

A.A builder cannot unilaterally change the carpet area of the flat. However, to my knowledge, super area has not been defined in any of the enactments passed by the Parliament or any State Legislature. Normally, super area includes carpet area and common areas of a multistoreyed building like stairs etc that are to be used by all the occupants. Therefore, it may be essential to go through the agreement with the builder to arrive at a conclusion whether the builder had the right to increase or decrease the super area of the flat. You can approach the Consumer Court in case you can prove that the super area was unilaterally increased or decreased by the builder and no approval was sought from you regarding variation of such area.  The claim for extra charges @ Rs 5 per sq. ft for extra area can also be contested in the Consumer Court in case the builder did not have the right to increase the super area unilaterally.

Declaring gifted money

Q.After selling an agricultural land, my father had gifted me some money. I made a fixed deposit of it. I also drafted a gift deed as I read in your articles about it.  Now my queries are as follows:

• Do I need to declare the gifted money while filing tax returns? 
• On tax forms, under which section should I mention the gifted amount? — Davinder

A.There is no column in the income-tax return for reflecting the amount received as a gift from a relative defined under Section 56 of the Act. 

Spending share in joint property sale proceeds

Q.A plot was purchased in the name of my wife in 1989. We had carried out construction on this plot for which two thirds of the total cost was contributed by my wife and one third by me. We had later given the building on rent and the rent was divided between both of us in the same ratio. 

Now we have sold this property. While my wife has bought another house from her share in the sale proceeds in order to save capital gain tax. I want to use my share to purchase bonds of REC or NHAI to save the tax. Both of us already own one house each. Kindly let me know if we can save LTCG tax on this deal through this arrangement? — Saurab

A.Your queries are replied hereunder:

Your wife can utilise her share of the amount of long-term capital gain arising on the sale of a residential house towards the purchase of another residential house.  There is no prohibition under Section 54 of the Income Tax Act, 1961 (The Act) stipulating that a person cannot claim exemption in respect of the amount of long-term capital gain, if he utilises such amount of capital gain for purchasing or constructing a residential house even if he owns another residential house.  The amended provisions of Section 54 of the Act also do not contain such prohibition. 

• You can utilise your share of capital gain for purchasing tax-saving bonds of Rural Electrification Corporation (REC) or National Highways Authority of India (NHAI). The amount of capital gain should be invested towards the purchase of such bonds within six months of the date of sale of a residential house. Section 54EC of the Act also does not contain any prohibition restricting the utilisation of the amount of long-term capital gain arising on the sale of a residential house for purchasing the tax- saving bonds in case an assessee owns a residential house other than one which has been sold. 

LTCG tax liability

Q. In your answer to a query (dated 11.7.2015)  it had been stated that the home loan interest is part of cost. I had purchased a flat jointly with my son for Rs 32 lakh. My son has taken a loan of Rs 15 lakh (for which I am a co-borrower) apart from spending Rs 1 lakh from his sources. I have given Rs 16 lakh for this house. The possession was taken in June 2012. My son is paying the EMI and has paid loan interest amounting to Rs 4.80 lakh till June 2015. Now, he is likely sell the flat for Rs 40 lakh. The balance of the loan amount of Rs 14 lakh will be payable by new buyer who will get the loan transferred in his name. The net receivable amount is Rs 26 lakh. My son is interested in buying a new flat for his own use for Rs 45 lakh by borrowing Rs 20 lakh from the bank. My query is: 

• If whole consideration + home loan are utilised for the new flat, will there be capital gain on both of us? 
• What will be the capital gain amount?
• I do not want that my name should be added to the new purchase. Can my portion of capital gain be utilised for the new purchase? If yes, then how. In case I have to invest my portion of capital gain in tax-saving bonds, then can I loan/gift the equivalent amount to my son from my sources? My income is Rs 2 lakh from interest income and pension. — Raj kumar

A.Your queries are replied hereunder:

• In the case cited in the query both you and your son are joint owners of the flat.  Capital gain arising on sale of such a flat would be apportioned in the ratio in which the flat is owned by both of you. Therefore, to seek exemption from taxability of the amount of capital gain, each one of you can utilise the amount of capital gain arising on sale of the flat provided the sale is effected after a period of three years from the date of taking the possession. Such utilisation has to be for purchase or construction of a new residential house. The utilisation has to be made  within a period of one year before or two years after the date of sale for purchase of a residential house or within three years after the date of sale for construction thereof. Both of you can seek exemption from the taxability of the amount of capital gain under Section 54 of the Act in case the amount of capital gain is utilised by each one of you within the period specified hereinabove. It is not essential to utilise the entire amount of net consideration in case the capital gain has arisen on account of the sale of a residential house.
• It is not possible to compute the amount of capital gain without the availability of the dates on which the amount was paid towards the purchase of the flat. This information is required for computing the indexed cost.
• You can utilise the amount of your share of amount of capital gain for the purchase or construction of a residential house in your own name only so as to seek exemption from the taxability of the amount of capital gain. You can also invest your share of capital gain towards the purchase of tax-saving bonds.
• You can gift any amount to your son from your own sources without attracting any tax liability in your hands or in the hands of your son.