I am planning to buy a new property in joint names with my wife who will be the first owner. Both of us are retired from professional life. She is retired bank employee with pension & interest income and I am retired professional with interest income and consulting services.
Our source of funding for this property are
1 sale of gold in my name. Back up invoice are in my name.
2 sale of stocks and mutual fund in the name of both
3 sale of plot in wife’s name
4 sale of flat in wife’s name.
5 loan from bank
All above source will attract LTCG .
My question is
1. can these four source of funding can be used to off LTCG and avoid tax. Other parameters like within three years the transaction will be completed.
2. can we use part of sale proceeds be used for repayment of loan and still be construed as investment in property and avoid LTCG.
3. any specific care to be taken for filing return in 2018-19, apart from source of funding and LTCG declaration.
Dear Gopalkrishnan ji,
Sources from 3 & 4 can be used.
You can use the entire Long Term Capital Gain proceeds on sale of a residential house to buy another house property (residential property) to save Capital Gains tax.
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, and save LTCG on sale of plot.
There is no provision to use LTCG for repayment of loan on paper.
You may kindly take care of black – white money combination (if any) carefully on Selling Vs buying funds. Also, do note that 1% TDS is applicable if the property registration value is Rs 50 Lakh and above (buying).
Suggest you to kindly consult a CA and take advice.
Kindly read :
Few more queries in continuation is for my wife who is first owner.
- I am told that there is some recent amendment in section 54f forbids your eligibility if you own more one residential home other than new asset on the date of transfer of original asset . In my case I own a plot and flat , so how it will be treated by income tax department.
2 is it only capital gains has to be invested or whole consideration amount has to be invested.
3. I am registering my new property in December 2017 & old property sale might happen in late 2018 so what is the period of ,3 years is relevant to me.
4. Can both the property consideration be invested in New property and still claim the LTCG . I will not be owning any property apart from new one on that day.
Thanks for your guidance
1 – Under category covered by Section 54, long-term capital gains arising on sale of residential house properties are exempt if such gains are invested for purchase or construction of another residential house. There is no restriction as to the number of residential houses you can own as on the date of sale of such house for claiming this exemption under Section 54.
However in order to claim the exemption under section 54F which covers long-term capital gains on assets other than residential house, you should not own more than one residential house other than the one you are acquiring on the date of sale of the other asset. So in case you own more than one house on the date of sale of the asset except the house in which you are investing the long-term capital gains, you can not avail the capital gains tax exemption by investing in a residential house under section 54F.
If you are acquiring a new property and on that date if you do not own any other residential house then I think 54f can be availed.
2 – Kindly go through the suggested article.
3 – If you are purchasing an already constructed one – 1 year backwards – is fine.
- In continuation to above thread, I the second applicant who owns one flat in my name is selling the gold and would like to avail benefits under section 54f .
- My schedule date of payment to builder is on September 2017.i will be able to sell gold in November 2017, so for short term I am using OD facility and fill back the same with gold sale proceeds.
- Since the entire sale proceeds are not going to builder directly and it is being used to repay the loan of OD already used will it be considered as clear transaction and will be entitled for 54f
- Or else to avoid any complications should I put the sale proceeds in capital gains account and pay next installment out of this account.
- I may incur of interest but if that’s is only solution I will go ahead or if you can give better advice please suggest.
I believe that there are no CG tax exemptions on selling of Gold.
CG Account and other options as discussed can be considered.
You may also consult a CA in this regard.
Dear Sreekanth I went through your article on LTCG. Quite informative. Thanks for detailed explanation.
I am paying few of my payment from loan/ oD to meet immediate down payment to builder. It’s taking some time to dispose off my property. I don’t want to default builder payment. So if I pay from my loan/ OD And square my OD account, will it be technically considered as technical compliance under LTCG and will not be disallowed.
I am giving below the event calendar . Please advise if I can avail the benefit of LTCG
Booking of flat Oct 2017
Agreement for sale Dec 2017
Sale of flat Dec 2017( existing)
Sale of plot March 2019( existing)
Expected possession of new flat June 2020/June 2021
Commitment (under RERA) JUNE 2022
I am not able to time my sale of property due to too much of variation in time schedule by builder. If he gives OC BY 2020 then my schedule of sale will not attract LTCG. but if he goes to 2021 or 2022 then my schedule goes hayware. Is there any case laws which is in favour of purchasers if I make the payment of sale proceeds directly to builder to prove my intention and still not adhere to deadline of section 54. Is there any way I can avoid LTCG by putting the sale proceeds in capital gains account f
and use the same at appropriate time to meet the needs of section 54. Or to be on safer side I should buy bonds and block for three years. On maturity should I use the funds only for purchase of property or it could be used for other purposes.
I am at loss to understand the logic of one year before and two years after as the schedule of builders are never consistent but payment to builder has to be consistent. Will the agreement for sale a good documents to prove my intention of using sale proceeds of existing property for purchase of new flat. please clarify
What is CGAS account. I sell my property in December 2017 deposit in CGAS ACCOUNT and use the same in June 2019 to pay builder which is booked iand abreement for sale done in December 2017 . Expected possession earliest is June 2021 latest by June 2022( for RERA) . Will I still be able to claim the benefit under section 54 for LTCG. please advise.
I sold my property in December 2017 and got full payment in January 2018. .
” To rationalise the existing provision relating to investment in capital gain bonds, the exemption will be available only in respect of long-term capital gains arising out of sale of immoveable property and investment in the bond will be for a minimum period of 5 year from the existing 3 years.”
I am planning to put in 54ec tax bonds by February end. Please advise if this is for three years or five years. As this is in proposal stage I presume it will be effective next financial year from April 2018
Hi..Yes, the bonds purchased from 01-Apr-2018 will have lockin period of 5 years from FY 2018-19 onwards.