CAPITAL GAIN ON SALE OF OFFICE PROPERTY.

[GOPAL KHETAN]

I have a office property/commercial premises, on which I used to conduct my propreitorship business.For the past 5 years,I have joined another co. as a director, and have rented out this office premise,and  showing the income as income from House property.

My question,is that I have received a good offer for this property for outright sale, in the event,I sell this property,and invest the proceeds in another commercial premises, which would again be rented, would this attract capital gains tax.

Please advise.

[CA Rachit Agarwal]

As per the property was used for the office purpose and hence the same was under fixed assets. The sale of such property would lead to short term capital gains as the same was classified as depreciable assets.If depreciation is continued from the date of letting of the office on rent, then the sale of property would classifed under Short Term Capital Gain.

However if the depreciation is not claimed, and same has been classfied under Investment property. The date of conversion is to be checked from depreicable property to investment property and accordingly classification of short term/long term could be classifed.

Tax planning to be done accordingly.

AI Summary

Tax Implications of Selling Office Property: Short-Term vs Long-Term Gains Based on Asset Classification and Reinvestment An individual inquired about the tax implications of selling an office property previously used for a proprietorship business and later rented out. They received an offer to sell and wanted to know if reinvesting the proceeds in another commercial property would incur capital gains tax. A tax advisor responded that if the property was classified as a depreciable asset, the sale would result in short-term capital gains. However, if the property was reclassified as an investment property without claiming depreciation, the classification between short-term and long-term gains would depend on the conversion date. Tax planning should be considered accordingly.