Most NRIs who buy property in India don't buy a finished flat — they buy into a project years before it's built, sign a builder-buyer agreement, pay in instalments tied to construction milestones, and only get possession — and eventually a registered sale deed — much later. That gap between "when I started paying for this" and "when it was legally registered in my name" creates a genuine, high-stakes question when the property is eventually sold: which date counts as the date of purchase for computing the capital gains holding period?
Get this wrong and the consequence isn't cosmetic. It's the difference between long-term capital gains (with a lower effective rate and access to reinvestment exemptions like Section 54/54EC) and short-term capital gains (taxed at slab rates, with far fewer planning options). For NRIs — who are already navigating repatriation, TDS, and treaty questions on the same sale — getting the holding period wrong can materially change what actually lands in the bank account.
The legal framework: what the Income Tax Act actually says
Two provisions govern this:
• Section 2(29A) defines a "long-term capital asset" as a capital asset held for more than the period specified in Section 2(42A).
• Section 2(42A) sets that period for immovable property (land, building, or both) at 24 months — this is the current threshold following
the Finance Act 2017 amendment, which reduced it from the earlier 36-month requirement specifically for immovable property (other capital assets retain different thresholds).
So the operative question becomes mechanical once you know the start date: hold the property for more than 24 months before the sale, and the gain is long-term (LTCG); 24 months or less, and it's short-term (STCG). The entire dispute in under-construction cases is about where that 24-month clock starts — and the Act itself doesn't spell this out for builder-allotment scenarios, which is exactly why it's been litigated repeatedly.
The core issue: allotment letter vs. agreement vs. possession vs. registration
An under-construction purchase typically generates a sequence of dates, all plausible candidates for "date of purchase":
1. Booking/allotment letter — when the builder or authority formally allots a specific unit to you, usually against a token or initial payment.
2. Builder-buyer agreement / agreement to sell — the detailed contract, often signed somewhat later, sometimes after further payment.
3. Possession — when the flat is physically handed over, post-completion.
4. Registered sale deed / conveyance deed — the final legal transfer of title, which can happen years after possession in some cases.
The tax department's default instinct — often applied at the assessment stage — is to treat the registration or possession date as the date of acquisition, since that's when full legal title formally transfers. Taxpayers, backed by a consistent line of CBDT circulars and High Court rulings, argue the allotment letter date should govern instead. This has been settled in the taxpayer's favour often enough that it's now the more defensible, better-supported position — but it still needs to be argued and evidenced correctly, because assessing officers don't always apply it without being pointed to the authority.
What CBDT's own circulars say
Two circulars form the department's foundational position on this, both originally issued in the context of Section 54/54F exemption timing but consistently extended by courts to the general holding-period question:
• CBDT Circular No. 471, dated 15 October 1986 — issued specifically for DDA (Delhi Development Authority) self-financing scheme flats. It states that an allottee under such a scheme acquires a right to the flat on issuance of the allotment letter, and that this date — not the date of possession or the date all instalments are paid — is the relevant date of acquisition. Payment of instalments was treated as a follow-up administrative act referable back to the original allotment.
• CBDT Circular No. 672, dated 16 December 1993 — extended the same self-financing-scheme logic beyond DDA to co-operative societies and similar house-building schemes, confirming it wasn't a DDA-specific concession but a general principle applicable to comparable allotment structures.
Because these are the department's own circulars, they carry real weight in assessments — an assessing officer taking the registration-date position is, in effect, departing from CBDT's stated view, which is precisely the argument courts have repeatedly accepted in the taxpayer's favour.
The case law
PCIT v. Vembu Vaidyanathan (Bombay High Court, ITA No. 1459 of 2016, decided January 2019) is the most cited recent authority on this point. The facts fit the classic under-construction pattern: the taxpayer was allotted a flat under an allotment letter dated 31 December 2004, with the formal agreement executed only later, on 17 May 2008. The Bombay High Court held that the allotment letter date is the date of acquisition — the taxpayer's right in the property crystallises on allotment, and payment of instalments and the later formal agreement are consequential steps that relate back to that original allotment date rather than creating a fresh acquisition date. The Court expressly aligned this outcome with CBDT's Circular 471 position.
Madhu Kaul v. CIT (Punjab & Haryana High Court) reaches the same conclusion from a slightly different angle: the Court held that identification of the specific flat or physical delivery of possession is not what matters — the right to hold the property crystallises on allotment itself, and subsequent events (instalment payments, possession) are consequential and don't reset the clock.
Vinod Kumar Jain v. CIT, (2012) 344 ITR 501 (Punjab & Haryana High Court), is to the same effect: the holding period is to be reckoned from the date of the allotment letter, not from the date of the letter offering possession. The Court's reasoning again centres on when the taxpayer's right in the property — as opposed to physical possession of it — actually came into existence.
Two further authorities are worth having on file. CIT v. Poddar Cements Pvt. Ltd., 226 ITR 625 (Supreme Court), is the foundational authority underpinning this whole line of cases: the Supreme Court held that "ownership," for tax purposes, includes a person in possession of a property who has acquired rights in it, even without a registered conveyance deed — ownership isn't confined to what a registered sale deed says. CIT v. Kuldeep Singh, 226 Taxman 103 (Delhi High Court), applies that same reasoning to hold that the date of allotment confers substantial rights and is the correct starting point for the holding period — and, being a Delhi High Court decision, it's the binding jurisdictional authority for any Delhi-based assessment, which is where a large share of NRI-owned property (and NRI clients' assessing officers) sit.
A recent, directly on-point illustration of all of this being applied together: in ACIT v. Mohit Saraf (ITAT Delhi Bench 'B', ITA No. 9/Del/2026, AY 2015-16, order dated 29 June 2026), the assessee had booked an apartment in the Commonwealth Games Village project (developed by Emaar MGF under a project development agreement with the DDA), paying an initial booking amount on 24 June 2008 and receiving an allotment letter for a specific unit on 26 June 2008. Roughly 95% of the total consideration was paid by February 2010 — but possession was delayed until April–May 2012, because the completed apartments were first used to house athletes during the 2010 Commonwealth Games under the DDA-Emaar arrangement, with possession contractually deferred until six months after the Games concluded. When the flat was sold in FY 2014-15, the Assessing Officer treated the holding period as running only from the 2012 possession date, held it was under 36 months (the pre-2017 threshold, applicable for this assessment year), reclassified the gain as short-term, and added over ₹2.6 crore to income while denying a related long-term capital loss carry-forward. The ITAT rejected this, holding — following Poddar Cements, Kuldeep Singh, Vinod Kumar Jain, and Vembu Vaidyanathan — that the 26 June 2008 allotment date was the correct reckoning point regardless of why possession was delayed, and confirmed the gain as long-term. It's a useful case to keep on file precisely because the facts look unfavourable on their face (a multi-year gap to possession) and the department still lost — reinforcing that delay in possession, even a lengthy one, for reasons entirely outside the buyer's control, doesn't reset the clock once a genuine allotment has occurred.
Taken together, these authorities establish a consistent principle: for allotment-based purchases (builder schemes, development authority schemes, co-operative society schemes), the date the right to a specific unit is allotted to you — not the date of the later formal agreement, not possession, and not registration — is the date of acquisition for holding-period purposes.
A note on redevelopment (surrendered flats, alternate accommodation)
A related but distinct scenario — common for NRI clients who've inherited an older Delhi or Mumbai flat that's since gone through redevelopment (the original flat surrendered to a builder, a new unit received later under a Permanent Alternate Accommodation Agreement) — raises the same style of question: does the holding period reset to the date of the new agreement or possession, or does it continue from the original flat's acquisition? It's a real, recurring question for NRI redevelopment sales, but it turns on a distinct set of authorities from the allotment cases above, and we don't have a verified citation to offer on it here yet. If this fact pattern applies to your sale, treat it as a separate question worth its own review rather than assuming the allotment-case reasoning above extends automatically — we're happy to look into it for your specific situation.
Why this matters especially for NRIs
This issue shows up more often, and carries higher stakes, for NRI clients specifically:
• Under-construction purchases are the norm, not the exception, for NRIs buying in India — often bought years in advance as an investment or for eventual retirement, then sold from abroad well after possession, sometimes without the seller closely tracking which date was recorded where.
• TDS at sale is calculated with reference to whether the gain is long-term or short-term — under Section 195, the buyer is required to deduct tax at the rate applicable to the actual character of the gain, and getting the holding period right up front avoids a mismatch between TDS deducted and tax actually due, which otherwise has to be sorted out through a refund claim after filing.
• Access to reinvestment exemptions turns on LTCG treatment — Section 54 (reinvestment in another residential property) and Section 54EC (capital gains bonds) are both available only against long-term capital gains. If a sale that should have qualified as LTCG (using the correct allotment-date holding period) gets mischaracterised as STCG because only the registration date was considered, these exemptions become unavailable entirely — not just less favourable.
• Documentation from years ago is harder to produce from abroad. The allotment letter, the payment schedule showing instalments tied to construction stages, and the builder-buyer agreement are often the only paper trail establishing the earlier date — and for an NRI seller, gathering these from a builder or society years later, from outside India, is meaningfully harder than it would be for a resident seller. It's worth locating and preserving this paperwork well before a sale is contemplated, not scrambling for it at return-filing time.