An Income Tax Appellate Tribunal (ITAT) Surat ruling has clarified that an allotment letter plays a key role in determining long-term capital gains tax on property sales. The decision states that the property holding period can begin with the allotment letter, not necessarily the registration date.
The ruling came in a case involving an NRI who sold a flat just 10 days after its registration. The ITAT Surat held that the property holding period for this NRI began with the 2011 allotment letter, not the registration in 2016.
While a flat sold shortly after registration might typically qualify as a short-term capital asset, the ITAT's decision clarifies that the date of registration is not the sole determinant for calculating capital gains tax.
For buyers of under-construction homes, this ruling means they should retain property documents, including allotment letters, even after registration is completed. These documents can establish an earlier acquisition date for tax purposes.
