Long term capital gains

Q & A ForumCategory: Financial PlanningLong term capital gains
Garjana388 asked 7 years ago
Dear Sreekanth 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. THANKS regards Gopalakrishnan
12 Answers
Sreekanth Staff answered 7 years ago
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 : https://www.relakhs.com/how-to-save-capital-gains-tax-on-sale-of-land-house-property/ https://www.relakhs.com/asset-classes-returns-tax-implications/    
Garjana388 answered 7 years ago
Dear Sreekanth   Few more queries in continuation is for my wife who is first owner.
  1. 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  
Sreekanth Staff answered 7 years ago
Dear Sir, 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.  
Garjana388 answered 7 years ago
Dear Sreekanth, 
  1. 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 . 
  2. 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. 
  3. 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 
  4. Or else to avoid any complications should I put the sale proceeds in capital gains account and pay next installment out of this account.
  5. 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. 
  Gopalakrishnan 9423683610
Sreekanth Staff answered 7 years ago
Hi, 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.  
Garjana388 replied 6 years ago

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.

Garjana388 replied 6 years ago

Dear Sreekanth
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

Garjana388 replied 6 years ago

In continuation

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.

Garjana388 replied 6 years ago

Dear Sreekanth

I sold my property in December 2017 and got full payment in January 2018. .

Quote

” 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.”

Unquote

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

Regards

Gopalakrishnann

Sreekanth Staff replied 6 years ago

Hi..Yes, the bonds purchased from 01-Apr-2018 will have lockin period of 5 years from FY 2018-19 onwards.

Sreekanth Staff answered 6 years ago
Hi, As far as i am aware of, there is no mapping of which funds are used for which purpose. I believe that as long as you meet time-line criteria, for disposing your property and acquiring another property, it should be ok.  You may go through some old court judgements related to this ; Article - 1 Article - 2  
Garjana388 answered 6 years ago
What is CGAS account and what is the time limit for investment in property from the day of deposit. For example I sell a property in December 2017 and deposit in VEGAS account and use it in june 2019( to be within two years ) as the OC of new flat is expected in 2021 July. With this can I still be eligible for benefits of LTCG under section 54. Please advise.
Garjana388 replied 6 years ago

I am giving below the event calendar.

1. Booking of flat Oct 2017. Property identified and booked.
2. Agreement for sale Dec 2017. Stamp duty paid.
3. Sale of existing property flat Dec 2017
4. Sale of existing plot March 2019
5. Expected possession of new flat June 2020/June 2021Commitment by builder (under RERA) JUNE 2022
6. Can I put the sale proceeds in CGAS account and use at appropriate time ( to avail benefits of sec 54 LTCG ) as within two year before the possession/ sale deed should executed.
7. Should in purchase Capital gain bonds
8. My payments to builder are due in Dec 2017, June 2018, June 2019 and June 2020.
9. I have no other source of funding except sale of property and personal saving as I am retired and banks are not approving 80% loan only 20% they are willing consider.
10. Flat sale cannot be postponed as I need money to pay June 2018 instalment to builder..
11. will I still be within the framework of section 54 if put in CGAS and pay June 2019 instalment

12. How do I tweak my plan to be within the framework of section 54 to avail LTCG
13. Which is better option Please advise if I can avail the benefit of LTCG

Sreekanth Staff answered 6 years ago
Dear Sir, Suggest you to kindly go through some of the recent court judgments which are related to your query, you may revert to me if you need any more details ; https://www.relakhs.com/long-term-capital-gain-exemptions-court-orders/
Garjana388 replied 6 years ago

Hello Sreekanth. I tried calculating LTCG through various online free tools. The results I get differ from each other and difference in few lacs. Can you suggest a tool or help me in correct calculation. I am giving below the details.

DATE OF PURCHASE 25-11-1994
VALUE OF PURCHASE 310000
STAMP DUTY PAID AT THE TIME OF REGISTRATION 10000
DATE OF SALE 20-01-2018
VALUE OF SALE 3865000
BROKERAGE 77300
LEGAL 10000
TRAVEL EXPENSES 35000

Sreekanth Staff answered 6 years ago
Dear Sir, Kindly consult a Chartered Accountant in this regard.
Garjana388 answered 6 years ago
Dear Sreekanth I sold my property in December 2017 and got full payment in January 2018. . Quote ” 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.” Unquote 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   Can you please define one lacs in respect to LTCG. IS it per script or per annum. I am not clear. Also setoffs is available in current / proposed tax regime.  Regards Gopalakrishnann
Garjana388 answered 6 years ago
Dear Sreekanth I sold my property in December 2017 and got full payment in January 2018. . Quote ” 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.” Unquote 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   Can you please define one lacs in respect to LTCG. IS it per script or per annum. I am not clear. Also setoffs is available in current / proposed tax regime.  Regards Gopalakrishnann
Sreekanth Staff answered 6 years ago
Hi, Regarding LTCG on Stocks/Equity MFs - It it not on scrip / unit basis, the entire LTCG realized (after selling of stocks/Equity MF units) in a FY will be considered for calculation. But, to arrive at this total LTCG, one needs to calculate the LTCG at each scrip/Unit level. Kindly read : https://www.relakhs.com/10-ltcg-tax-equities-budget-2018/
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