I have an apartment that I want to sell. If I sell it before 31 March this year, will I have to pay the entire capital gains tax as advance tax by 31 March? My reservation is that the seller will pay me in 2 instalments so I will not have enough money to pay full tax before end of financial year. If I sell the property in April 2025 instead, I will get time till June 15 to pay advance tax, is that right?
– Name withheld on request
It is assumed that you wish to sell an apartment in March 2025, for which payments shall be received in two tranches in separate financial years (FYs) i.e. one in March 2025 (i.e. FY 2024-25) and the balance in FY 2025-26.
It is assumed that you are below 60 years of age and the advance tax provisions are applicable to you.
As per the tax laws, a taxpayer is required to pay advance tax, if tax payable (after taking into account the tax deducted/ collected at source), for a given FY exceeds ₹10,000. Advance taxes are required to be paid as per the below prescribed instalments during the FY:
• On or before 15th June: Up to 15% of tax payable
• On or before 15 September: Up to 45% of tax payable
• On or before 15 December: Up to 75% of tax payable
• On or before 15 March: Up to 100% of tax payable
Capital gains tax on the sale of an apartment must be paid in the financial year in which the property is transferred, regardless of when the payments are received. Consequently, the taxpayer is also required to pay advance tax on these capital gains in the same financial year.
It has been a subject matter of debate as to when should a capital asset be considered as transferred i.e. whether on date of agreement to sell, date of execution of sale deed, registration date, date of actual delivery of property possession etc.
There are various judicial precedents in this context. Hence, what will constitute as date of transfer in your case will need to be analysed based on a thorough review of the facts of your case and underlying documents.
If the property is considered as transferred by 15 March 2025 and hence capital gains liability has triggered in FY 2024-25, you will be required to pay entire advance tax on said capital gains in the instalment due on 15 March 2025.
If the sale is done between 16 March to 31 March 2025, the entire advance tax due on capital gains is required to be paid by 31 March 2025. Non-payment of advance tax within the said dates would attract interest cost.
If the property is considered as transferred in FY 2025-26 and the capital gains liability hence triggers in FY 2025-26, advance tax thereon will need to be paid in FY 2025-26, as per the prescribed instalments which fall due post such transfer.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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