I bought a residential apartment (under construction) in May last year for Rs 22.6 lakh. I took a loan from State Bank of India. Though the loan sanctioned was Rs 21 lakh, I have taken a disbursement of only Rs 15.5 lakh. The house is now ready for occupation. I have incurred a total cost of Rs 26.5 lakh till date (excluding the bank interest). Due to personal reasons I am selling the property now for 25 lakh. How do I show this loss in my income-tax filings?

Can I claim exemption for the bank interest I have paid? Can I claim the stamp duty I have paid for this property? The builder made me pay service tax and VAT, but did not give any receipts for that. What do I do? — Vadhi Sharat Chandra

We understand that the property is registered in your name as the stamp duty has been paid thereon. Accordingly, the expenditure incurred on the stamp duty will form part of the cost of acquisition while computing capital gain or loss on transfer of property.

Further, since the property is held for fewer than 36 months, it is a short-term capital asset and the loss from its sale would be shown as short-term capital loss under the head ‘capital gains' in the tax return and would be calculated as full value of consideration less cost of acquisition and cost of improvement (stamp duty, service tax, etc.). This loss can be set off against short-term or long-term capital gains of that financial year, if any. The remaining loss will be carried forward.

While computing the loss under the mentioned head, the bank interest paid will not be allowed as deduction as there are separate provisions for allowing the subject interest while computing income under the head ‘income from house property.'

The service tax and VAT paid by you on account of service received are allowed as deduction while computing capital gain or loss on transfer of property. However, in the absence of receipts it will become difficult to substantiate the amount claimed, if the tax return is picked for assessment in future.

Mail your queries to taxtalk@thehindu.co.in

(The author is Partner, KPMG.)

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