I had purchased a residential plot of land (in my name) in FY 2002-03 through allotment from Haryana Urban Development Authority (HUDA). I sold this plot (without doing any construction) in January 2016.
The long term capital gain has accrued from this sale. I plan to use the proceeds from this sale for constructing a house on a different residential plot of land that was acquired in FY 2003-04 (jointly owned by my mother and me).
Please advise if I can use the proceeds from the sale from the first plot (my individual name) to construct house within 3 years on the mentioned residential plot (jointly owned by my mother and me) and avail the tax benefit (under Sec 54) without having to pay any long term capital gain tax. I do not own any other property in my name.
1 Answers
Hi,
Kindly note that Section 54F is applicable in this scenario.
- If you plan to use the gains to build a house, it has to be done within three years of the sale of the property.
- You can use the entire sale proceeds (received by selling a plot / land) to buy a new house or to build a new residential house.
- If you use a part of the money, the deduction will be proportion of the invested amount to the sale price.
- The deducted capital gain (from sale of land) becomes taxable if you buy another house(other than the new one) within two years of the transfer of the original asset or construct a new one within three years.
- If the new house is sold within three years, the deduction claimed will become taxable as a long-term gain.
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