Many buyers book a flat in an under-construction project and, before it is even built, decide to sell their booking to someone else through a nomination or assignment. This transaction is not the sale of a flat, it is the sale of a 'right to acquire' a flat, and the tax law treats that right as a capital asset of its own.
What Is Being Sold: A Right, Not the Property
When a buyer who has booked an under-construction flat (typically by entering into an agreement with the builder/developer and paying instalments) decides to exit before the project is complete and possession is handed over, they are not selling 'the flat' (which legally does not yet exist as a completed, conveyed property in their name). What they are transferring is their contractual right to acquire that flat once construction is complete, often done through a 'nomination' or 'assignment' arrangement, where the original buyer's name is replaced by the new buyer's name in the builder's records, usually for a fee.
This Right Is Itself a Capital Asset
Key principle: The right to obtain a flat under a builder-buyer agreement is recognised as a capital asset distinct from the flat itself. When this right is assigned/transferred to another person for a price, it constitutes a 'transfer' of a capital asset under Section 2(47), and any gain arising is taxable as capital gains, computed by reference to the cost and holding period of this right, not of the (not-yet-existing) flat.
Cost of Acquisition and Holding Period for the Right
The cost of acquisition of this right is generally the amount the original buyer has paid to the builder towards the booking and instalments up to the point of assignment (i.e., the cumulative payments made under the agreement). The holding period runs from the date the right was acquired (typically the date of the original booking/agreement with the builder, or allotment letter) to the date of assignment to the new buyer.
Worked Example
Assigning booking rights before possessionMr Bose booked a flat in an under-construction project in January 2024 for a total agreement value of Rs 80 lakh, and by August 2025 (19 months later) has paid Rs 32 lakh to the builder in instalments as per the construction-linked payment plan. In August 2025, before possession (the project is still under construction), Mr Bose assigns his booking rights to Ms Iyer for Rs 40 lakh, with Ms Iyer taking over the remaining payment obligations to the builder directly. Mr Bose's capital gain on this assignment is computed as the assignment consideration (Rs 40 lakh) minus his cost of acquisition of the right (the Rs 32 lakh paid to the builder so far), i.e. Rs 8 lakh. Since the right was held for only about 19 months (January 2024 to August 2025), which is less than 24 months, this would be a short-term capital gain, taxed at Mr Bose's applicable slab rate, with no indexation benefit.
Why the Holding Period Often Surprises People
A common misconception is that the holding period for an eventual sale of property starts only from the date of possession or registration of the conveyance deed. For an assignment of booking rights before possession, the holding period is for the right itself, measured from the original booking/allotment date to the assignment date, which in many cases falls short of the 24-month threshold for long-term treatment, resulting in short-term capital gains taxed at slab rates rather than the more favourable long-term rates with indexation.
TDS Implications: Section 194-IA
Where the assignment consideration for transfer of such rights in immovable property exceeds the threshold applicable under Section 194-IA (TDS on transfer of immovable property), the new buyer (transferee/assignee) may be required to deduct TDS, similar to a regular property purchase, since the provision has been interpreted to extend to transfer of rights in immovable property in addition to the immovable property itself in various contexts. Both parties should clarify this obligation as part of the assignment documentation.
Frequently Asked Questions
If I hold the booking rights for more than 24 months before assigning them, do I get indexation benefit on the amount paid to the builder? ▼
If the holding period of the right (from original booking/allotment to assignment) exceeds 24 months, the gain would be a long-term capital gain, and indexation of the cost of acquisition (the instalments paid to the builder, indexed based on the years in which each instalment was paid, or a reasonable approach for indexing the cumulative cost) would generally be available, reducing the taxable gain compared to a short-term scenario. The specific approach to indexing instalments paid over multiple years can involve some computational complexity.
Does the builder's transfer/nomination fee for processing the assignment affect my capital gains computation? ▼
A nomination or transfer fee paid to the builder to process the assignment (changing the buyer's name in their records) is generally an expense incurred wholly and exclusively in connection with the transfer, and can typically be deducted from the assignment consideration while computing the capital gain, similar to brokerage or other transfer-related expenses in a regular property sale.
What if I assign my booking rights for exactly the amount I have paid the builder, with no profit, just to exit the deal? ▼
If the assignment consideration equals the amount already paid to the builder (no gain), there would be no capital gain to tax on this transaction, since the sale consideration equals the cost of acquisition. However, it is still advisable to document the transaction properly (the assignment agreement, amounts paid and received) for record-keeping, particularly since the new buyer's TDS obligations and the builder's records of the transfer would still need to reflect the transaction accurately, even where no gain arises for the assignor.