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How to save Capital Gains Tax on Sale of Land / House Property?

Last updated: August 13, 2019 | by

Capital asset typically refers to anything that you own for personal or investment purposes. It includes all kinds of property; movable or immovable, tangible or intangible, fixed or circulating.

Examples include a house, land, household furnishings, stocks, bonds or mutual funds held as investments etc.,

When you sell a capital asset, the difference between the purchase price of the asset and the amount you sell it for is a capital gain or a capital loss. Capital gains and losses are classified as long-term or short-term.

If Land or house property is held for 36 months or less 24 months or less (w.e.f. FY 2017-18) then that Asset is treated as Short Term Capital Asset. You as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL) on that investment.

If Land or house property is held for more than 36 months more than 24 months (w.e.f FY 2017-18 / AY 2018-19) then that Asset is treated as Long Term Capital Asset. You will make either Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) on that investment.

You may have to pay Capital Gains Tax on STCG / LTCG.

In this post let us understand – How to calculate Short Term capital gains on sale of land or property? How to calculate Long Term Capital Gains on sale of land or house? What are the applicable capital gain tax rates on sale of land / house property? How to avoid / save / minimize capital gains tax on sale of land or flat?

How to calculate Capital Gains on sale of Land or House property?

Short Term Capital Gains Calculation is calculated as below:

STCG = Total Sale Price – Cost of acquisition – expenses directly related to sale – cost of improvements.Calculation of Capital Gains on sale of property or house pic

Long Term Capital Gains Calculation;

The LTCG calculation is similar to STCG. The only differences are, you are allowed to deduct Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price and also claim certain exemptions to save capital gains tax.Calculation of long term Capital Gains on sale of property or house pics

With effective from Financial Year 2017-18, the base year for calculation of Indexation is going to be 2001.

(Indexation is done by applying CII – cost inflation index. This increases your cost base ie purchase price and lowers your gains. Your purchase price is adjusted for the impact of inflation.

How do you calculate the indexed cost of purchase? The indexed cost is calculated with the help of a table of cost inflation index.

Divide the cost at which you purchased the Property by the index as on the date of the purchase. Multiply this by the index as on the date of sale.

For Example : If purchase year is 2011 and year of sale is in Financial Year 2015. Then indexed cost of purchase would be –

Indexed cost of purchase =  (Purchase price / 184) * 254.)

Below is the Cost Inflation Index Table from 2001-02 to FY 2018-19 for your reference. Cost Inflation Index (CII) for FY 2018-19/ AY 2019-20 Notified by CBDT at 280.Latest Cost of Inflation index table from Financial year 2018-19 Assessment year 2019-20 indexed cost of acquistion gift property LTCG STCG

Applicable Capital Gains Tax Rates on Sale of Property

  • Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.
  • Long Term Capital Gains are taxed at 20%.

How do I save Capital Gains Tax from sale of Property? 

Capital gains tax on Short term gains is unavoidable and no exemptions are available to minimize your tax liability. However, you can claim deductions to lower the tax liability on long-term gains.

How to save Capital Gains Tax  by claiming Exemption u/s Section 54EC? (Applicable to LTCG only, on sale of both land / house property / commercial property)

  • Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
  • These bonds are issued by the Rural Electrification Corporation and the National Highways Authority of India.
  • The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable.
  • These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property. The Bonds issued u/s 54EC for saving of LTCG on sale of property will now have a lock-in period of 5 years instead of 3 years from FY 2018-19.
  • You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).
  • You can invest a maximum of Rs 50 lakh during a financial year in these bonds as per Budget 2015-16.

How to save Capital Gains Tax  by claiming Exemption u/s Section 54? (Applicable to LTCG on sale of house property only)

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. Below conditions need to be satisfied though;

  • The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)
  • The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.
  • If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. Do note that ‘cost of land’ can be included in the construction cost.

How to save Capital Gains Tax u/s 54F? (Conditions applicable to LTCG on sale of Land or Commercial Property)

Below conditions need to be satisfied in case you sell land and are planning to buy a residential home.

  • 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 time-frame for investment is the same as that for capital gains from residential property.
  • You should not own more than one residential house prior to this investment.
  • 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.
  • This new house purchased or constructed must be situated in India.
  • The proceeds should not be invested in a commercial property or in another vacant plot.

Capital Gains tax exemptions sec 54 54ec 54f on sale of land or residential property LTCG 2 years pics

How to Save Long Term Capital Gains Tax without buying another House Property?

If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing , you can deposit the CAPITAL GAINS (not entire sale proceeds) amount in a public sector bank or other banks as per the Capital Gains Account Scheme- CGAS, 1988.

  • The capital gain (full amount or utilized amount) can be deposited in CGAS account.
  • This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.
  • The deposited money can be used only to buy or construct a residential house within the prescribed time frame.
  • If you withdraw funds from this account, they have to be used within 60 days.
  • If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
  • The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

How to Save Long Term Capital Gains Tax under New Section 54GB(5)?

Under Section 54GB(5) of the Income Tax Act, 1961, long term capital gains on the sale of residential property will be exempt if the sale proceeds are invested in a eligible startup,  provided such transfer took place prior to March 31, 2019. As per the latest full Budget 2019-20, this has now been extended to March 2021.

Important points on Capital Gains Tax & Sale of Land / Home

  • Agricultural land in a rural area in India it is not considered a Capital Asset, and therefore no capital gains are applicable on its sale.
  • While calculating capital gains, expenses related to transfer / sale like advertisement expenses, brokerage expense, Stamp duty, Sale deed registration fees, Legal (lawyer) expenses etc., can be deducted from the Purchase price.
  • Sale of a property that is inherited or accepted as a gift will also attract capital gain/loss provisions even though you haven’t spent any money to acquire it. In such a case, capital gains will be computed on the basis of the cost to the previous owner, indexed to the year of purchase.
  • If the cost of the new residential property is lower than the total sale amount, then the exemption is allowed proportionately.
  • The new property must only be bought on the name of the seller and not on anybody else’s name. Joint ownership can be acceptable but exemption can be limited to the share of ownership.
  • You must also remember that you are allowed to purchase or construct only one new asset from the capital gain that accrues. This means that you cannot make multiple property acquisitions and thus seek to reduce your tax outgo. However, if you sell more than one property, you can invest the resulting cumulative capital gain amount in a single new property.
  • If you use the capital gain amount to clear loans then tax on LTCG cannot be saved. No exemptions can be claimed.
  • Capital Gain Tax cannot be saved if the sale proceeds are invested in a commercial property, agricultural land or plot.
  • According to the latest amendments in the Income Tax Act, the residential property which is bought by re-investing the long-term capital gains must be situated in India.If you would like to buy a property outside India say in the US, you need to pay tax on the capital gain portion of the sale proceeds.

To summarize;

  • Categorize your capital gains i.e., Short term or Long term.
  • Calculate Short Term Capital Gains (STCG) / Long Term Capital Gains (LTCG).
  • If you have STCG, taxes are payable as per your income tax slab rate.
  • If you have LTCG, to save capital gains tax ;
    • You may invest the gains in another Residential property (or)
    • Buy Notified Bonds (or)
    • Temporarily invest in Capital Gains Account Schemes.
  • Else, you have to pay 20% on your Long Term Capital Gains.

Calculation of Capital Gains Tax on sale of property can be sometimes be a tricky one. It is advisable to exercise caution when claiming Capital Gains Tax Exemptions. When in doubt, kindly consult a tax expert or a Chartered Accountant.

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(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)

Sreekanth Reddy:

Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging & property consultancy for the last 9 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider. The main aim of his blog is to "help investors take informed financial decisions.""Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

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  • I sell my agricultural land to developers in Fy 13-14 & now I get consideration in flats in Fy 19-20

    How to calculate my Tax libility

  • Hi,

    My friend has a residential house. He got that as Inherited. He is senior citizen & not filling any income tax returns. He don’t have any other house other than this.

    Now he want to sell this residential property. Present cost of this property is around 80 Lakhs. He want to buy a residential house with 30 Lakhs.

    He don’t know the purchase price of the house, which his grandfather bought 50 years back.
    How to calculate indexation for this property ??
    How to calculate the LTCG on the remaining 50 Lakhs?

  • Hi
    I sold a house and buy new one on joint name of daughter and my self whose name should be 1st and can I get capital gain tax exemption or guide

    • Dear Kailash,
      Yes, you can claim the LTCG exemption on proportionate basis. Kindly consult a CA.

  • I had bought one residential plot on 04.08.09 amounting Rs.1.2 lakhs, sold the same on 03.04.18 for Rs9.9 lakhs. l have bought one residential plot on 13.03.19 amounting to Rs.8.28 lakhs and stamp duty paid 0.414 lakhs. Please tell me the details of tax calculation.I think as capital gain is 8.7 lakhs & investment is 8.694 lakhs, I have to pay tax on Rs.600/- only. pl clarify.

    • Dear Sanjay,
      Kindly refer to the points mentioned under Section 54F in the above article.

      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 not just vacant plot.

      Cost of land + construction can be included in the calculation..

  • Sold my land property in second week of April 2019. Reside in nagpur in my own house. I want to construct first floor in my own house, My house is Ground floor only, constructed in 2014. Is nvestment of long term capital gain amount in construction of fist floor allowed to save long term capital gain taxes under section 54 of Income tax rule. Please advice.
    Thanks.

    • Dear Pradeep,
      I believe that ‘extension of existing house’ will not qualify.
      You may kindly cross-check with a CA as well.

  • I bought a house in July 2009 and sold in February 2019. I have already one more house in my name. Can I save Tax by investing LTCG in another house in May 2019.

  • Hello sir, I am a housewife and I bought a land in 1989 in Guwahati in a price of Rs.10,000. Now I am going to sell the property in june 2019 and the govt sell price of said land is 75,00,000 (seventy five lakh). What will be LTGC and amount of tax to be paid. Till date I have no means of other income and a non tax payer

    • Dear SULTANA,
      Long Term Capital Gains are taxed at 20% with indexation benefit.
      Suggest you to kindly consult a Chartered Accountant for exact tax calculations.

  • I bought a plot in 2016 and in March 2019 I am selling a residential flat which I purchased in november 2006, can I save the LTCG by building my house on that plot?

  • Husband and wife own residential two different plots, one each, in individual’s name. If both of them sell their plots and invest the entire individual’s sale proceeds to buy a single house in joint name. Are they eligible to claim LTCG exemption benefits under section 54 F.

    • Dear Sharma,
      Yes, they are eligible as per the proportion of their ownership share in the new property..

      • Thank you Mr. Sreekanth Reddy. Can you suggest the relevant reference clause in support of the your reply under section 54F.

        • Dear Sharma,
          This is my general suggestion and I do not have any ready reference.. However, you may kindly go through below links, can be useful. Kindly cross-check with a CA as well on this..

          Read :
          Link -1
          Link – 2

  • I purchased a plot in Panipat since 1995. Now I am thinking of building four floors on it and selling them. How the capital gain will be calculated on the sale price of the floors. Please advise

  • I have brought house in year 2009 for rupees 15 lakhs from Home Loan . Now I want to sell off in this year 2019 at expected price of 35 lakhs .What taxes I have to pay . If i have to pay tax in which case i can save the tax , plz suggest

  • Hi Sreekanth,
    I would be glad if you could clarify this for me. I have sold my plot after 8 yeas and have some capital gains. I want to put money into the NHAI bonds to avoid paying LTCG tax. Will I have to put only the LTCG amount or the entire sale amount in NHAI bonds to avoid paying the LTCG tax on this sale.
    Regards,
    Suraj

    • Dear Suran,
      Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds.

      You may go through this link..

  • Hello sir
    My mother is having 3 residential property and if she sells any one prperty which arrise ltcg can she get benefit if she buy new residential house. Pls help.

    • Dear Deepu,
      I believe that she can claim the exemption.
      You may kindly consult a CA as well in this regard.

    • ANS AGRICULTURE LAnd sale RS 48.00 LAC & investment in capital investment market complex , His income tax paid?

  • HI there

    I would like to have a piece of suggestion

    I am residing in Melbourne since 6 years( No PR ,Will come back India after a year and not filing any tax return in India and I was with very less salary)

    I am going to sell a property in India where capital gain is about 11 lakhs for 14 years ( I bought when I got married and in India)

    My question is do I need to show this gain to income tax authorities to avoid question in future?

    Can I invest in other property to avoid tax if any?

    Do I need to invest in 54EC bonds to avoid tax?

    Do I need to show this gain even I am not filing tax return?

    Thanks for your valuable support

    Regards

    Surya

    • Dear Surya,
      Yes, you need to disclose these LTCG in your ITR.
      To avoid LTCG tax, you can opt for any above listed avenues.

      Also note that when an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced from the date of purchase) a TDS of 30% shall be applicable.

      So, you got to file your ITR. Kindly consult a CA who takes care of NRI taxation matters.

      • Thanks for the prompt reply!
        I came to know that the plot buyer is not going to deduct any % of amount, even though it is better to go for safe investment right?

        Regards
        Sk

        • Dear SK,
          As far as I am aware of – As per the Indian Income Tax Act, when a resident purchases any property from a non resident, he has to deduct income tax (TDS) and pay the balance amount to the seller.

  • Hi sir,
    My father who is 72 yrs now owns a agricultural land in a village and a residential plot in a district place on which a house is built. This plot was bought in 1972. now he want to sell both farm land and residential plot with house.
    I am totally unaware of these government rule for property deeds. So I have some very basic queries as below. I have read your replies to many queries above and really they are quite helpful. Hence want advice on below queries from your view
    1) if my father sells his farm land, wil the selling amount be taxable.–if yes
    do he need to purchase same category (farm land) property to get tax exemption?
    –if not
    can he use that money for gifting it to daughters or buy shop in their name

    2) if my father sells residential plot (bought in 1972) and as he wish to buy a small house and a shop,
    can he buy both or only shop using LTCG of sold residential plot

    3) if he cant buy shop, can he keep the remaining LTCG (after buying new house) in the form of FDs in sbi or any senior citizen schemes for more than 3 yrs.
    if not can he gift remaining money to his daughters.

  • My mother had got an inherited land property which she sold for Rs 40lacs in rural area. She wants to distribute the money to her 4 daughters. The daughters do not own any house or land. Hence, they want invest the money to purchase land or house. Whether my mother has to pay the tax before distributing the money or the daughters have to pay the taxes? or can they save tax by puchasing house?

  • Dear Sir
    I have sold my land and my buyer has deducted its TDS against the same. The land was more 10 years old and attracted Capital Gain. Please tell me how I can save my Capital Gain against the same.

    Regards

    Pratip Kumar

    • Dear Pratip,
      You can claim the TDS as refund while filing your Income Tax Return.
      If your query is related to LTCG exemption then kindly refer to the points given in the above article.

  • Respected sir
    I need clarification in
    this regard.suppose a old
    House is sold in April 2016,there will be time for
    filing income tax returns&
    Claiming tax exemption till July 31st 2017,to park
    the capital gains in CGAS.
    Now my query,is can we
    Deposit the the entire sale proceeds of the house in Fixed deposit,in
    a nationalised bank.until
    July 31st2017
    I request you to kindly clarify my doubt

  • Sir
    A site is being purchased and a house is being constructed from the sale
    Proceeds of a old house.
    Tax exemption is being claimed,as the capital gains were parked in CGAS.AS you ,say that the new house cannot be sold, for a period of three years from the date of acquisition.Now I want to
    Know whether the new house can be transferred
    Through gift deed ,within
    Three years ,as their will
    Be no money transaction.

    • Dear Umesh,
      A Gift Deed leads to Transfer of Ownership Title hence I believe that this violates the eligibility condition for claiming LTCG and can be reversed (if claimed).

      There is no clear cut rule regarding this scenario and can lead to Compliance issue. Kindly consult a CA as well.

  • Respected sir
    I need a clarification.can
    a house property be transferred through gift
    Deed as it is without consideration before three years,which is purchased from a long term capital gains and exemption is availed by parking sale proceeds in
    CGAS

  • Hi Sreekant, i have one query, can any individual who have long term capital gain money and he wish to give some portion of money to his only daughter for the repayment of existing housing loan. So it is permissible under long term capital gain ?

    • Dear Karunakar,
      Yes, it is eligible..

      However, one should not own more than 1 residential house prior to this investment.

  • Hello sir

    My father had sold a property in mumbai for100 rs. Ltcg is 65 (65%). We are considering a flat for 50L and claiming exemption on the ltcg.

    1. Will the full 50L be considered as an exemption? (Because someone had said that in case of a house investment, the exemption is pro rated to extent of ltcg, ie 65% or 32.5L in this case)
    2. Can i club the 2 methods, buy a house and invest the remaining amount in 54ec Bonds to claim exemption for the full ltcg (65). How much should it be?

    • Dear Venkatesh,
      Is the property sold a house or a plot?
      If it is a house then Section 54 is applicable and ‘Proportionate’ clause is not applicable.
      Yes, you can club two tax saving options (can buy a new property + also invest in Bonds u/s 54EC) to save LTCG taxes.

      • Shreekant,

        I wish to sell a plot and buy an apartment. Cost of apartment is higher than the sale proceeds of plot. But the apartment has two registration documents although the apartment overall is only one. Will this be considered as two apartments or only one? Will I get benefit of exemption to save LTCG tax.

  • Hi
    I have purchased a flat in Chennai in the year 1990 and selling the flat now for 54 lakhs. I bought it for 60000.Now I am going to buy my father/mother flat for 55 lakhs in chennai.we are five in the family. I am going to giving them each 16 lakhs including my share which comes to 80 lakhs, whereas I am going to show it as 55 lakhs only. Now can i give the money to my brother /sisters as gift, if so how can I show it in the income tax. If not what should I do.

    • Dear kousalyasridharan,
      If you are going to invest in a new property (for your parents) for Rs 55 lakh then how is it possible to give Rs 80 lakh more to your family members??

      Is the expected Registration value of your old Flat is different from the expected total Sale value??

  • Say, Sold Residential Land Plot for Rs.100, (LTCG = 60).
    New house (or bought land & construction done, total = Rs.60) bought for Rs.60.
    Can the balance Rs.40 be invested in Capital Gain Bonds to save tax ?
    In other words can we invest part of sale proceed in property & balance in bonds so that the LTCG tax becomes nil ?

  • Dear Srikant,
    I had asked this question yesterday but I don’t see it on the post so asking again.
    Firstly thanks for the very informative article.

    My question is as under.
    1. I am staying in a house AT noida, jointly owned by me and my wife. The sale deed is in or names.
    2. I have inherited a property along with my 2 brothers ,in Delhi, plot with a land built in 1970 by my father .
    We are going in for collaboration building of the property in collaboration with a builder giving him one floor. I am also selling my share of the property to the builder and the payment is mentioned in the collaboration agreement. On completion of the building I will sign all necessary documents to hand over the property. However I will get my payment of my share once we hand over the property to the builder for commencing the cnstruction.

    My question is can I avail of the LTCG exemption under section 54 and connected sections by buying another house /flat in my name from the proceeds of the amount I receive. Once again I am staying at NOIDA in a flat which is jointly registered in my and my wife’s name.

    Shall await for your response at the earliest.

    Regards

    Col Anand

  • Sir,

    I own 3 residential houses. One is solely in my name where as the other two are joint with my wife. I intend to sell 2 of my flats (one which is solely owned by me and other which is joint) and buy another (single) flat on joint names. My question is… after I sell the two flats… I will be left with one flat which is owned jointly by both of us. If I invest my entire LTCG from both flats to buy a new single flat… will LTCG tax be applicable on us (specifically asking because we both would still be owning one flat jointly while we are buying a new flat). Is it that since we already own one house LTCG exemptions will not be available to us?

    Hopefully, I’ve been able to communicate my question affectively. Much thanks in advance my friend!

    • Dear Rohit,
      I believe that you can claim LTCG exemption based on the given inputs.
      You may kindly consult a CA as well.

  • Dear Sreekanth sir

    Can you Please clarify the following:
    What is the procedure to be followed for obtaining the approval from I T Authorities for the capital gains on sale of property and the amount to be deposited in capital gains bonds.by NRI

    2.If the property sold is jointly owned by husband and wife, is it necessary to obtain approval separately on 50-50 basis from IT Authorities

    • Dear Bharat,
      1 – Under Section 54EC, NRIs can invest in capital gains bonds issued by REC and NHAI to get a capital gains exemption. However, investment in these bonds will be locked in for three years.

      How to claim an exemption?

      Under Section 195 of the Income Tax Act, an NRI can apply for a tax exemption certificate. One needs to write to the Income Tax authorities to apply for this certificate. The application needs to be sent to the authorities who handle the same jurisdiction where the NRI holds his/her PAN. If you are purchasing a property to get a tax exemption, you need to submit the allotment letter to the tax authorities. If you don’t have the allotment letter, give them a copy of the payment receipt. If you invest in capital gains bonds, you need to create an affidavit stating the amount and date of your investment.

      2 – If the ownership share is not mentioned in the Title deed, by default the ratio is considered as 50:50.

  • Sir,

    My brother wants to sell his existing residential plot for 45 Lakhs. And I would go for a bank loan of 75 Lakhs. We both are planning to buy jointly a new residential plot for 1.2 Cr. Now my doubts are
    1) Can my brother save tax from the LTCG.
    2) Is it compulsory that my brother has to buy a constructed house instead of a residential plot.

    Thanks in advance,
    Murthy

  • Sir, We have a property gifted to my father by his Elder brother who is no more. Now my father wants sell that property. My father is about 77 years. What are the tax exemption available for a senior citizen on the Income received through sale of that property.

    • Dear Naveen,
      There are no separate or exclusive tax exemption provisions for Sr.Citizens.

      The options that are available to all individuals are as given in the above article.

  • Hello Srikanth,

    The query is on Long Term Capital Gains on a property; a residential Land purchased in 2008 ~ 2,45,000/-lacs and sold in 2017 for an amount ~11,34,000/-. After indexing The LTCG is 6,45,000/-
    However, in future I want to reinvest the amount in residential property. Should I deposit amount in Capital Gain account in Banks approved by Govt. And How much Please guide as early as possible..

    Thanks

    • Dear Mr Sharma,
      Yes, you may deposit the capital gains in CGAS, before the due date of filing Income tax return, i.e. 31st July of the respective assessment year.

      The deposited money can be used only to buy or construct a residential house within the prescribed time frame.

  • I bought a plot in the outskirts of the city. Its is HMDA approved layout. However since it is over 8 km from a nearest municipality, I was told this is exempted from any form capital gains. Can you confirm this please?

  • Hi Sreekanth

    Thanks for such a detailed information. I had read many articles on LTCG but yours is most informative and easier to understand. I have a question and hope you can help me out. I receive different answers of experts on this.

    I purchased a residential Plot in Mohali City at the price of 5.50 Lacs in year 2000 and sold it in July 2017 at the price of 23.25 Lacs. With the earned money I purchased another Residential plot in same Mohali city. I have no plan of any construction and will not be selling this plot in next 5 years. Also I don’t have money left to purchase any bonds etc. So Do I have to pay the LTCG tax? Experts giving me different options here: Few says as the new purchase is a residential Plot and not a residential house so I need to pay the LTCG tax. However few says as the plot is residential so it exempts you for paying LTCG tax. Can you shed some light on this?

    Thanks
    Manpreet

    • Dear Manpreet,
      In case, you are going to contruct a residential home on the vacant plot, not going to invest the proceeds in Bonds or not investing in CG Savings account then you need to calculate the net Long term Capital Gains and pay taxes on them accordingly.
      Suggest you to kindly consult a CA.

  • Hi Sri… we sold our parental house in Nov 2017…It was constructed on a plot my father purchased. Since it was constructed i have no proof to determine the cost of construction. How can i calculate the cost of that house in 1994 and arrived at the total cost to apply indexation. Further do i still have time to invest in long term bonds as 6 months time has already passed.

    • Dear Ajain,
      You may kindly consult a Govt approved/authorized Property valuer in your locality and get the valuation done.

      As per the section 54EC of the Income Tax Act, such capital gains are to be invested in these bonds within six months from the date of transfer, irrespective of whether those six months expire in the next financial year or not.

      Therefore, if the house sold by you has a transfer date of October 1, 2017, then you have time only until 31 March, 2018 to invest in 54EC bonds. For those taxpayers, whose transfer date is after October 1, 2017, the six months will end in the next financial year ..

  • I sold property bought by me in August 2005 at a cost of Rs.262500 in December 2017 for Rs. 88,40,000. I started construction of a new house in May 2017 and the full amount will be spent only by June 30, 2018. How should I show the cost and exemption in my tax return ITR 2 ?

    • Dear RAJAMANI,
      You can find relevant sections (like 54EC,54F etc) under the head LTCG on immovable property.
      Suggest you to kindly consult a CA.

  • Dear Sir,
    I have purchased a plot for 2.5lakhs in 2008 and sold now for 45lakhs. Can I save LTCG tax by investing this amount for construction of my existing single floor house into three floors house?

  • I have a three properties, A, B and C.

    – A was purchased as a site in 2001. Constructed a house subsequently.
    – B is a flat purchased in 2013.
    – C is a site purchased in August, 2017, and subsequently constructed.

    I intend to gift C to my major son and wife, equally.

    Now, I still own A and B, still. I intend to sell A.
    – I will make a certain amount of LTCG in the process.

    Since C was purchased within one year before selling A,
    – Can I show that I have reinvested the LTCG in C(Aug, 2017)?
    – I will now be left with only property B in my name

    My doubt is wrt to the clause “…not own more than one property…”. Multiple CAs have given multiple interpretations on the matter and I’m confused.

    Should I gift away property B to my wife so that I have no other property at the time of selling A?

    Your advise is greatly appreciated – Thanks, in advance!

  • Hi,
    I have some doubts about one of my land selling issue. I purchased one plot 5.05 cent at cost of 5 lakhs in 2010. But land was registered at the cost of Rs. 83,000 as per Govt guide value. And I spent around Rs.50,000 for brokerage & fence fixing. Now we are planning to sell that plot with the cost of 12.50 lakhs. Government guide value now is 1.60 lakhs /cent means 8.00 lakhs Rs, they are going to register.

    Now my questions are:

    1.How much the long term capital gain tax to be paid? and how we can calculate?
    4.Is it possible to avoid the tax? if yes, how we can avoid?
    5. This 12.5 lakhs, we are planning to repay our SBI home loan in Chennai flat purchased .

    So, kindly sent your feed back & advice in this issue….

    • 1. Post indexation, your 83K has become 147745. So, (8L – 147745) is your LTCG. Unless you invest the gains(not sale proceeds) appropriately, you will end up paying tax at the rate of 20%.
      2. In the above article, ways to save LTCG tax have been explained… look for 54, 54F, etc…
      3. I think repayment of housing loan will not be considered as reinvestment of LTCG. Additionally, that you had another property at the time of this sale, brings me to the same doubt that I have put, above, in my query. Lets wait for an answer to that question.

  • Hi,
    I had sold a residential property for Rs. 11 Lakhs in the FY 2017-18. The indexed cost of the land was Rs. 5.9 Lakhs. I purchased a residential plot to construct a house in April 2018 for Rs. 10 Lakhs. I will complete the construction by mid 2019. Am I eligible for exemption in LTCG as per 54F in the FY 2017-18?

  • Hello Srikanth,
    The query is with ref. to the Long Term Capital Gains on a property; a residential property purchased in 2009 in the name of my wife for an amount ~ 13 lacs and sold in 2017 for an amount ~38 lacs. The indexed cost of acquisition comes close to 19 lacs. The LTCG is 9 lacs.
    However, she spent all sale proceeds to buy a residential property in the name of her Sr. Citizen inlaws (my parents). This new property was bought for 80+ lacs. Does the original LTCG of 19 lacs qualify for exemption (when new property bought in the name of ageing parents / inlaws) or will it still be considered as LTCG to be paid for?
    Thanks

  • I have sold land with a small building and made a LTCG of 5 lakh on June 2, 2018. I have also invested an amount of about 60 lakh in installments during the one year period (prior to the above sale) in an under construction building. The total amount includes registration charges. But the actual registration will take place within about 2 months. Can I adjust LTCG against this investment in property?

  • I have purchased site/plot in the year 1999 at Rs.75000.00
    Now site value is about 30,00,000.00
    Now I want to construct four Floors and sell it.
    What is capital gain tax or it is my capital?

    • Dear Nagendra,
      It depends on the selling price..
      Suggest you to consult a CA and plan your transaction.

    • Your site, post-indexation, is worth 216902. 30L – 216902 is your LTCG, just for the site. If you construct now and sell, immediately after, the cost of construction will not qualify for LTCG… you will be able to show that as an expense, though, when you file your ITR in the subsequent AY.

  • Hello,

    Thanks a lot for your article.
    My FIL( Sr Citizen) wants to gift his land, to my wife. That was brought on 1984 value around 500, Now the value is around 15L. My wife is in 30% bracket already and we have bought an under-constructed flat past year 2017 in our names, which will get completed another by a couple of months.

    Kindly suggest which way I can save tax, Whether selling in FIL name or my wife name. If we are selling in FIL name, how can we receive the money for home payment?

  • Dear Sir,
    I purchased a plot for 1350000 in 2017. Now I have purchased another plot for 1850000 for construction of house after taking loan. Now I want to sell my old plot at 1400000 in urgency…how will it be taxed….pls guide

    • Dear sachin,
      Rs 50,000 is a Short term Capital Gains as the period of holding of first plot is less than 2 years. So, no tax exemption can be claimed on STCG.

  • Dear Sir, Under section “To summarize” it is written:

    “You may invest the gains in another residential property”. Here may I take that the word “gains” means the entire sale proceeds ?

    Next sentence says “Buy Notified Bonds” and here may I assume that we buy for the amount equal to the actual Capital Gain only and not the entire proceeds !

    I am an uninitiated person and thoroughly confused by the nomenclature used. Pls clarify ! Thanks.

    • Dear Tom,
      Under Section 54F, it relates to entire Sale proceeds.
      Sec 54, it is Long Term Capital Gain sonly.

      Sec 54EC which pertains to Bonds relate to LTCG only and not entire sale proceeds.

  • Hi
    I purchased a flat in 1997 for 6 lacs and sold it forv42 lacs in January 2018. Please let me know as how to save capital gain tax ? How much will it be ?

    • Dear Ajay,
      Kindly go through above article on the options to save LTCG tax.
      For exact CG calculations, suggest you to consult a CA.

  • Hi sreekanth.
    Nice to meet u.
    I am not able to get purchasers to sell my commercial site which is 30,000 sq feet plus a house and 6 shops.You know why? It is because of tax which they don’t want to pay.Kindly tell me NRIs are exempted to pay taxes when they come forward to purchase my propperty?

  • Hello,
    I had a purchased a flat at 4.5 Lac in 2014, in which my elder brother was a joint owner as well.
    In March 2018 I have sold that flat for an amount of 8 lac.
    All amount was credited only in my bank account through cheque & cash deposit
    Now i want to File my return this year to claim my tds deducted from my salary & want to save my capital gains under section 54 of IT since I’m buying a new flat for which I’ll be the only owner
    Am I eligible to file my return under section 54. Please advise

  • Hello
    My father wanted to sell his ancestral property and buy another property in his daughter’s Name
    Please can you tell me does this come under tax free or taxable

  • I had a plot (not agricultural) which I sold for Rs. 40 lacs. I received LTCG of Rs.28 lacs which I invested in a residential flat. Can I claim exemption of capital gain? If yes then under which section of 54?

  • Hi
    I have purchased a plot in 2010 for 2.5 lakhs and constructed a house on it for 38 lakhs. I have lost all the bills pertaining to construction to prove the cost of construction. I am planning to sell the property. Please guide as to how to calculate the cost of property for taxation purpose.

  • Dear Sreekanth,
    My parents were living in a bungalow in Mumbai. In the same plot, my uncle too had a bungalow. The plot was and both the bungalows were in my uncles name. Though we were the rightful owners of 1/3rd of the plot, my uncle had refused to transfer 1/3rd of the plot in my fathers name , hence the whole plot and both the bungalows were in my uncle’s name. My uncle died in 2007. His son, my cousin, put the plot for re-development and we got two flats in the new building which came up on the plot. My cousin made the 2 flats in my mothers name. My mother has gifted one of the flats to me. I intend to sell this flat.
    My question is :- How will long term capital gains be computed? My parents have been occupying the bungalow since 1964 and for a few years it was given on rent when they had relocated to another city and later came back to stay at the bungalow. My uncle has given the 2 flats as a gift(i do not know the terminology used , something like due consideration or kind consideration …..).
    How will long term capital gains be computed if I sell the flat now?
    thanx

  • Hi Sree

    Couple of queries on LTCG of property.

    1. Cost of acquisition: I had paid a brokerage of 2% amounting to Rs. 44000. Also incurred Lawyer and Documentation expenses of Rs. 12000 back in 2010 while purchasing the property. There are no receipts for these. Could I still add these expenses to my cost of acquisition while calculating LTCG? Generally does the ITO ask to furnish for any evidences for these nominal costs?
    2. Are property taxes paid year on year deductable under “Expenses on property” while calculating LTCG?
    3. I had made some repairs in my property year by year (again no receipts or bills for these) totalling upto Rs.150000 in 7 years. Can I show these up under the head “Cost of improvements carried out in the property”? Or does it have to be a real ‘improvement’ resulting in any ‘value-add’ to the property? Kindly clarify asap.

    • Dear Vivek,
      1 – These expenses can be claimed. But, in case there is a scrutiny after filing your ITR, you may have to show the documentary evidence for these costs.
      2 – These come under the head ‘income from house property’.
      3 – same as point ‘1’.
      Suggest you to kindly consult a cA.

  • Hi Sreekanth,
    Very useful info.I have one doubt.I already have 2 flats on my own.Now I have sold one property and purchase another.Will I get the LTCG tax benefit.Or while purchasing the new flat should it be the first property.

    Thanks,
    Koushik

  • You mentioned capital gain from house sale can be used for house construction and plot value can be considered as capital gain reinvestment. Is there a split between plot cost to house construction cost specified. Any other recommendations about area of plot to area of house.

  • My mother acquired a land in inheritance and constructed a house on it in 1991. We recently sold the house.
    1. What would be the acquisition cost here to compute the tax?
    2. We sold the house on March 28th this year. She plans to re-invest in buying a flat with 100% of the sold money, with
    50 % partnership with me (daughter). In this case, which year should we file for tax exemption?
    FY 2017-18 ? or
    FY 2018-19 ? as we are planning to re-invest.

    Warm regards

    • Dear Bhargavi,
      1 – The Fair Market Value (NAV) of the property as on 1 st April, 2001 will be considered as cost of acquisition for calculating capital gains.
      2 – If you are not re-investing in new property then you need to file Income tax return before July 2018 and pay taxes (if any).

      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. Below conditions need to be satisfied though;

      The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)
      The deduction allowed is equal to the actual investment or the capital gain, whichever is lower.
      If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. Do note that ‘cost of land’ can be included in the construction cost.

      • Thanks a lot for the reply. Request to consider answering the following too.
        1. How an we identify the NAV of the property in that area as on 1st April, 2001? Which organization or website can help us on this? The registrar office ?

        2. The property is my mother’s and she wants to re-invest in purchasing a re-sale(second hand) residential flat. Does this qualify for income tax exemption? Does she still need to file returns in July 2018?

        3. The sale was done only on 28th March, 2018, which means she still has time to re-invest in residential flat till 28th March, 2019. Is she still supposed to file returns before July 2018?

        4. For e.g., My mother sold the house for Rs. 100, I am (her daughter) planning to add another Rs. 100 to purchase the flat and we both would be the co-owners of the flat. Does this qualify for my mother’s income tax exemption (,being the co-owner of the re-invested residential flat before 1 year) ?

  • Dear Mr. Srikanth,

    I have owned a residential plot (ground) in Chennai. I purchased this land in the year 1990.

    In November 2017, My son and I jointly purchased a flat in Porur, Chennai for Rs. 1.01 crore. Rs. 51 lakhs we jointly paid from our savings and remaining Rs. 50 lakhs we opted housing loan from SBI. My son was the main applicant and I am the co-applicant for this loan.

    If I sell the land which have I mentioned above, as on today I can sell it for Rs. 50 lakhs. Kindly let me know whether I can repay the bank housing loan with the sale proceed and avoid capital gain tax. Please note that I am the joint owner of the newly purchased flat, the other joint owner is my son (only son) and also I am a co-applicant for the housing loan.

    Thanks

    P.S. Venkat

  • Hi,
    I have purchased the under-construction flat in 2015 and I received possession in July 2016. This flat is rented out and now I want to purchase a new flat for my own residency with the help of a home loan, currently, I am staying on rent in the same city. What is the tax if I sold my flat which was purchased in 2015 to pre-pay the home loan which I will be taking to purchase a new flat for my own residency?
    Can I purchase a new flat with the help of a home loan and then sale my earlier flat to pre-pay the home loan? What is the tax liability?
    Which one of the below is the best option:
    1) Sale of existing flat and then purchase a new flat with the sold flat amount?
    2) Purchase a new flat with the help of the home loan and then use the sale value of existing flat to pre-pay the home loan?
    Can I use sales proceeds to pre-pay my Home Loan?

    Warm Regards
    Ramdas

  • I have sold a builder apartment. Allotment Letter issue date is April-2012, Possession Date is June-2016 and Sale Deed is signed in April-2018. Does this come under STCG or LTCG and Can I take Indexation benefit during Income Tax filing ? Additionally, do I need receipts for brokerage paid to claim benefit on 1% brokerage paid to the broker ? This property belongs in Noida. Thanks !!

  • Hi sir
    I want to ask i have purchased a plot in 1990 and do the boundary on plot and i have sold my plot in april 2018 .so is the expense occured on boundary considered in the value of plot..?
    Which helps in reducing my capital gain tax

  • My mother inhqeritedq the house property from her daughter on the death of the daughter and sold it in six months. Is there any way of saving capital gains tax.

  • Hi Srikanth,

    If I get LTCG for the sale of joint property owned by me and my spouse, are the gains split equally between the two?

  • Dear Mr Reddy

    I am an NRI and selling property in India. Can my air fares be claimed as expenses as I am here for the sole purpose of selling my property and have had to extend my stay 3 times?

    Any advice would be greatly appreciated.

    • Dear Kate,
      As per the Income Tax Act, any expenses related to Transfer of the property can be claimed..You may deduct the expenses incurred from the sale price, which will give you the net selling price of the property. Expenses incurred can include legal fees, transfer fees, traveling fees etc. Then, the difference between this and the indexed cost of purchase will be your capital gains.

  • Srikanth,

    Going by the below point under section 54 e/c

    Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.

    how do I invest in these bonds can these be done through SBI?

    And once after 3 years can I reinvest the entire amount into another project or will I still be liable to pay capital gain tax.

    • Dear Ajith,
      Yes, you can invest through SBI.
      After three years you pay tax only on the interest amount generated from these bonds. Entire investment amount (the capital gain amount that you have invested) will not be taxed, you may re-invest for any other purposes.

  • Hi,
    Sir I am a business man, Having a hardware shop, the TO of my business is in and around 875000/- pa. what is my problem is that . i am going to file my IT return for the first time for the FY 2015-16 and 2016-17. During the period of 2015-16 i sold one of my property for a gain of almost 20 lakhs and the entire amount was received in cash. i invested the entire amount in FD in my name and spouse name in cooperative bank A/c.. My doubt is that whether i have to show this transaction in my ITR or can i ignore the same… If not suggest some other way… one more the bank authority has taken my wife and my Pan card..
    Proprty Detail….
    Purchase Value 4.5L
    Sale Value 7.5L
    Holing period more than 3ys
    Sale and purchase value is as per document….

    • Dear Akshith,
      Yes, you need to include the Capital Gains on sale of property in your income tax return and pay taxes on Gains.
      Suggest you to kindly take help of a Chartered Accountant and file your ITRs.

  • DEAR SIR,

    MY QUESTION IS I HAVE SALE A FLAT . AND PURCHASE AGRICULTURE LAND WITHIN 3 MONTH CAN I SAVE TAX… THIS IS RIGHT WAY

  • I booked a flat in Nov 2013 which is under construction for 60 Lakh. I have paid 47 lakhs through loan and savings. The balance amount is yet to be paid. The flat is expected to be delivered by mid 2018.
    I have sold my only residential flat now i.e Jun 2017. The purchase price was 27 Lakh in 2008 and now sold for 89Lakh. Capital gain is approx 37 Lakh.
    Can I save tax on long term capital gain by showing the investment of 37Lakh in the new house which I booked in 2013 and being handed over in 2018.

  • Hi Sreekanth,

    I sold my residential plot during April 2017 for Rs.33 Lakh. I have spent 8 lakhs for my personal use.
    I’m planning to buy another plot for Rs.55 Lakh by using Rs.25 Lakh out of Rs.33 Lakh.
    Remaining 30 Lakh (55-25), I’m planning to take loan. Please let me know whether I have to pay capital gains tax in this scenario.
    Thanks,
    Kumar

      • Thanks Sreekanth.But is it not mandatory to construct a house in the vacant plot? to save tax. Kindly let me know
        Thanks,
        Kumar

  • Hello Sreekanth,

    Request your advise on following queries?

    So as I understood that any interest paid to the Bank can be considered in calculating Cost of Acquisition of Asset for the Calculation of Short Term Capital Gain / Loss; is my understanding OK?

    Secondly, I wish to know – For a certain property, me and my wife jointly applied for the loan (since she would not have individually qualified for the required Loan Amount) and bought a under-construction property in joint name. The Loan was regularly serviced through monthly earnings of my wife. We sold the property in 2015 in less than 3 years during construction period itself; upon considering Bank Interest as Cost of Acquisition of Asset – it turned out to be Short Term Loss. In this case, since most of the EMI’s were paid by my wife, Can she be the Sole IT Assessee having Short Term Loss on her ITR or can there be any other split other than 50:50 for Short Term Capital Loss incurred?

    Thirdly, we can use this Short Term Capital Loss as above to Offset any Long Term Capital Gain in the subsequent years, if any?

    Thanks
    Vikramaditya

  • Hello Sir,

    Thanks for the article. i am from UP and owns two flats, first is in my name and the second one is jointly with my wife. I purchased the first flat in 2008 @ 15 lakhs+1 lack registry (approx) and now planned to sale this flat for 39 lacs. this is only in my name.
    1. How much is capital gain amount in my case.
    2. Can i deposit the received amount in savings account, if yes, what amount full or only the capital gain amout and for how long. Or i need to deposit the full amount in only capital gain account?
    3. Can i invest this amount in under construction residential property.
    4. Can i pay my second home loan with capital gain amount?

    Regards,

    • Dear manoj,
      1 – Kindly consult a Chartered Accountant for calculations.
      2 – Advisable to receive full amount (Registered Sale value) in your bank account.
      3 – Yes.
      4 – You can use the amount to repay home loan but there is no tax exemption provision on LTCG.

  • Dear Sreekanth,

    Thanks for an excellent article on LTCG tax on sale of a plot of land. I have 3 queries:

    1) If I use part of the LTCG due to sale of a plot of land to buy a new residential apartment and invest the remaining amount in REC/NHAI bonds within 6 months, will I not need to pay any capital gains tax ?
    2) If I own one apartment in my name singly and another apartment jointly with my wife, if I invest LTCG due to sale of a lot of land into buying a 3rd apartment, will I be eligible for saving capital gains under Section 54F?
    3) If my mother owns a residential apartment and I buy that from her using LTCG, can I claim CG tax benefit under Section 54F ?

    Would appreciate a response from you on my above queries.

    Regards,
    Murali R

      • Dear Sreekanth,

        Thanks a lot. One more query – if the land is owned by myself and my spouse jointly and if the LTCG on its sale is, say, INR 1 crore – can I and my spouse split this LTCG and invest INR 50 lakhs each in notified bonds and claim CG exemption in our respective IT returns?

        Regards,
        Murali

  • Hello Srikanth,

    Request your response on following queries:
    1. One of the statements you made is “If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing “; my question around this is when you say date of income tax filing; are you referring to the date for the filing of the FY in which Asset Sale takes place. For example; we’re staring at the date for filing taxes for FY 2016-2017 however if any capital sale happens now; it will be for FY 2017-2018. So which date of income tax filing are you referring to here?

    2. For short term gain / loss calculation: does the cost of acquisition include any bank interest payments? For ex. if somebody took a loan however sold the property before 2 years; interest paid during this time to the bank; will it be included in the short term gain / loss calculation?

    3. There are several instances of delay by builders these days in handing over the property. I took a bank loan and made 100% down-payment to builder for an under construction apartment in 2006; the builder could only get it completed in 2017 and registered in 2017. Although the registration stamp duty was also paid in 2015. I plan to sell the asset now in 2017. From taxation point of view – will this be considered under short term or long term calculation?

    Pls advise…

    Thanks
    Vikramaditya

    • Dear Vikramaditya,
      1 – If date of sale happens in FY 2017-18,then we are referring to Assessment year filing date which can be in July 2018.
      2 – Your Home Loan EMI consists of Principal and Interest component. The principal component is allowed as deduction under Section 80C. However, if you sell your residential house within five years, you may have to forgo your tax benefits. The entire amount of deduction claimed under Section 80C in prior years on the amount of the principal repayment will be added to the taxable income in the year of sale of the property. Also, no income tax deductions shall be allowed in respect of repayments made during the year of sale of the property.

      Kindly note that this rollback is applicable only to deduction(s) claimed under Section 80C. Deductions claimed under Section 24 (b) on interest payable on your home loan will not be withdrawn.

      You can include the Interest Cost in your Cost of Acquisition if it is solely for the purpose of Buying the property. But be prepared as it is a debatable point and can be subject to litigation.
      3 – It is debatable. Kindly consult a CA in person and take advice. (Mostly this can be considered as LTCG, if any)

  • Dear sir,

    I want to sale one old house with 22 lacks on June 2017 capital gain Rs 19.5 lacs

    against sale i want purchase one Flat Rs 28 Lacs it is under construction will be completed by dec 2018. and i want to take bank loan for total 28 lacs ? and i want to use home loan interest for my IT exemption?

    and i want purchase one PLOT with 14 lacs without any loan and house will not be constructed now.

    by doing those sale and purchase can i get capital gain exception with out paying tax

    appalaraju

    • Dear appalaraju .. If you are not using the sale proceeds to buy a new home then no tax exemption is allowed (also, for plot, the construction has to be completed within 3 years).

  • Dear Sir,
    i had purchased a plot on 30th april 1981 for Rs.13413 now i had sold it on 21st march 2017 for Rs.40,57,000/- against that sale i want to purchase another plot of similar amount do i have to pay capital gain tax?

    • Dear vibhor,
      The proceeds can not be invested in a commercial property or in another vacant plot for claiming tax exemption.
      However, if one is planning to construct the house on the newly acquired plot within 3 years after sale of asset then can claim tax exemption u/s 54F.

      • thanks for the information but please tell if we construct a commercial building on the newly acquired plot still we can claim tax exemption u/s 54F ?????

  • kindly pardon me. My question is :-
    I want to sell the house and
    the proceedings are to be kept under LTCG A/C.
    I do not want to Purchase and/or Construct a House,
    with in the specified period of 2/3 years as the
    case may be.
    After expiry of three (3) years,
    can I utilise the entire amount earmarked as LTCG,
    as I please, without any Tax Deduction.
    If not, what are the ways left behind to go in
    for without Tax Deduction.

    • Dear Sarma ,
      If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
      For other options, you may kindly go through the above article.

  • Dear Sir,
    I am planning to purchase a new residential plot by selling one of my old converted plot (7 years old).
    I own a flat where I live currently and have invested into another flat which is under construction (not yet registered) but bank loan has already started.
    My question is whether I can use the money I get by selling my old plot to purchase the new residential plot.
    Will I be exempted on Long term capital gain?
    If not then what are the options allowed to save the tax?

    I may plan to construct a house in the new residential plot in near future.

    Please advice.

    Thanks and Regards,
    Vishu

    • Dear Vishu,
      The proceeds can not be invested in a commercial property or in another vacant plot for claiming tax exemption.
      However, if one is planning to construct the house on the newly acquired plot within 3 years after sale of asset then can claim tax exemption u/s 54F.
      But in your case, as you are own more than one residential property, you can not claim tax exemption u/s 54F.

  • Suppose, if I put all proceeds in Capital Gain A/C , then after how long this total amount become Tax Free.

  • Dear Sir,

    I am Sanjay, I have purchased a residential land plot in the name of my mother-in-law, because I along with my family was out of India. Now I want to sell that land plot and intend to buy an apartment with that sale proceed and some housing loan. Shall I be able to avail the LTCG benefit from this sale deed.

    Kindly reply.

    Regards,

    Sanjay

    • Dear sanjay .. Exemption on LTCG taxes can be claimed by your mother in law only, if she reinvests the sale-proceeds / Capital gains in new property (as the property is in her name).

      • Thank you so much Sir.

        If I use the sale proceeds of above plot for purchasing an apartment, will there be any complication for filing ITR, for me and my mother in-law (a housewife).

        Regards,

        Sanjay

          • Thank you so much Sir.

            If possible, please let me know.

            If my mother-in law gives the sale proceeds to me for buying an apartment, do I or my mother in law will have to pay tax, STCG or LTCG or something else.

            Kind regards,

            Sanjay

              • Thanks Sir.

                If i get it done re-registered (sale deed or gift deed) in my or my wife’s name, then how much time we have to wait for LTCG benefits.

                Kind regards,

                Sanjay

  • Hi Sir, Recently I sold my property for 33L now I wolud like to plan plan agricultural farm is this amount exempted from tax

  • hi,

    I have purchased plot with the name of my younger brother with value of 3.43L and plus registration charges before 3 Years. he is not earning yet (studying).

    I am working in private sector and i like to purchase flat in metro city. if he will sale this plot up to 7L how much amount will be taxable to him? can he save tax ? or to utilize full amount to purchase the flat for me.
    or is that correct option, transferring ownership of plot and utilize the fund withing month for purchasing flat for me.

    • Dear Nitin,
      The extent of tax amount depends on his share in the Capital Gains.
      You can not utilize his share of Long term Capital gains to buy a property in your name.

  • Hello,
    I just gave my property to a builder for promoting. I will be getting flat in the new building. The promoter gave 6Lakh rupees as part of the exchange also. Now how can this amount be invested to save the LTCG tax exemption. This amount is also so minimal that investing on another residential property is getting difficult. Please assist.

  • Good morning Sreekanth,

    I’m selling my house and the deed of sale will be registered on 27 April 2017.

    So from that date, I will no longer owner.

    My question is who should pay the property tax 2017/2018? Is it me before I leave my house? Or the new owner.

    If entire tax is paid before 30th April, I will earn a rebate of 5% on my incurred tax amount.

    Thank you for your answer.

    • Dear Lambert,
      It all can be mutually agreed and can be included in the sale price.
      You may ask the new owner to bear it as you are the owner for just one month in this FY.

      • Good morning Sreekanth,

        How long would it take to pay the LTCG taxes after the sale of the house? Would it be possible to deposit the money in the bank for a very short time until the deadline for payment of LTCG taxes?

        Taxes will of course be paid on time to avoid penalties.

        Thank you for your reply

          • Thank you very much Sreekanth for your quick reply. But you forgot to tell me the payment time limit for LTCG Tax. Within six months or one year from the date of signing of the deed sale? Thanks

              • OK THANKS Sreekanth, but you don’t telll me the payment time limit for LTCG Tax. Within six months or one year from the date of signing of the deed sale?
                A friend told me to pay taxes within a period of six months from the signing of the deed-sale. If the time is exceeded there is to pay penalties.
                Thank you for your response

  • Hi Sree,

    Thanks !!

    [Inherited property]

    1. What is the minimum percentage of Capital Gain to be re-invested ?

    2. Can we produce bills spent on maintaining the property over the years and that amount will be directly debited from total capital gains ?

    Thanks

    • Dear Dipesh / SG ..May I know if you are posting comments with two different Display names??
      1 – There is no minimum as such.
      2 – Yes, can claim it under Cost of improvement.

  • Hi Sreekanth Reddy,

    Thanks for an nice article !!

    Well, I have Query regarding one inherited property from maternal side.

    1. My Maternal Grandmother was owner of house and both my Grandfather and Grandmother passed away
    Only my mother and her sister(my Aunt) are successors. Currently property is in their names – both mother and aunt
    2. Property was purchased around year 1960 by my maternal grandparents in around Rs 20000 INR
    3. Current estimated cost is around 20000000 INR

    Query: 1. Is there a way to save more tax on capital gains if me and my aunts children add their names in that property and share capital gains ?

    Query 2: How to calculate the total capital gains on above property ?

    Please guide in detail to minmize tax liabilities

    Thanks !!

    • Dear SG,
      1 – The quantum of tax on gains will remain the same, only thing is the tax amount can be shared by number of owners of the property.
      2 – Sale of a property that is inherited or accepted as a gift will also attract capital gain/loss provisions even though you haven’t spent any money to acquire it. In such a case, capital gains will be computed on the basis of the cost to the previous owner, indexed to the year of purchase.
      Suggest you to take help of a CA.

  • I have purchase a plot on 28/05/2002 for residential purpose for Rs 2,32,375, Registration charges Rs. 36300 . I have constructed a house (Construction cost 7,60,000) and completed in the month of May 2003. I have sell this house for Rs 5550000 on 07/04/2017 , brokerage charges Rs 90000 (without receipt) . how to calculate capital gain tax. May I consider Rs 11,18,675 (cost of plot Rs 232000 + Registration charges Rs 36300 + cost of construction of house Rs 760000 + brokerage 90000) the cost of acquisition for calculating capital gain?

    • Dear Chandradeepak,
      Yes, you can consider the said charges/costs, and can use indexed cost of purchase price ..
      Suggest you to take help of a CA and get the calculations done!

  • Hi,

    I have 30 Lakhs in Capital Gain Account and I want to buy another property within 2 years however new property cost is 25L (Including Registration). Can I utilized balanced 5 lakhs for house interior with proper bills or do I need to pay LTCG tax (20%) on balance amount (5L)? Please confirm.

    Thanks,
    Sachin

    • Dear Sachin..I believe that there is no separate provision for utilizing LTCG for interior design expenses..

      Kindly note that :Cost of Interiors and wood work will be covered under cost of Improvements and allowed as deduction at the time of sale of this property .To claim this expenditure you have reasonable bills of Interior decorator, contractor/ material bill with you.

  • Hi Sreekanth,
    Thanks for a informative website/blog. Here is my situation and seek your comments :
    1. Purchased a flat in Bamgalore in 1993 for Rs.4.2 lakhs and sold it on March 24, 2016 for Rs.43 lakhs.
    2. I do not intend to purchase or construct a new house
    3. Would like to invest the CG in the approved bonds
    4. My questions – A. Can the cost of repairs done in the last 23 years to the flat be deducted ? B. Do I have to invest in the bonds before july 30, 2017 and declare them in my Income tax filing ? C. Can I open a CGAS account and deposit the whole amount right now and then buy the bonds later say in OCtober 2017 ? D. Do all banks offer the facility of opening a CGAS account ?

    Thanks for your help in advance

    • Dear Shyamsunder,
      4 A – They can be included as cost of improvement.
      B – Can invest in bonds within 6 months from the date of sale of asset.
      c – You can invest in CGAS but have to use the amount only for home construction. Yes, most of the banks have this provision.

  • My grandmother sold a house of 20 lakhs and now from this amount she wants to buy a new houses one each in the name of her 2 daughter in laws . So if houses are buyed in the name of my mother and aunt. will my grandmother be exempted from tax.

  • Dear sir
    Greetings!
    1) I Have purchase one very small & old house in Visakhapatnam on 25/03/2003, purchased cost Rs 5 lacks registered value Rs 2.13 lacs and I have spent Rs 4 lacs ( no paper) for repairing, painting etc. now what Rs. will be conceder Is my purchase cost. 5 lacs + 4 Lacs = 9 lacs?, ( or ) 2.13 lacs ?
    2) Now I want to sale this house with 24 lacs document to be registered Rs. 21 lacs, and I have to spent broker charges 1 lac ( may be paper will not be available) now what will be my sale cost Rs. 24 +1 = 25 lacs? (or) 21 lacs only?
    3) The above transform what will be my LTCG Rs. ? and how I can saving the LTCG without pay LTCG.
    4) I have 1 FLAT purchased at dec -2007 bank loan taken 11.65 lacs every month I am paying EMI Rs. 11,632/- total 12.91 lacs till date ( interest + principal amt) till date outstanding is 9.8 lacs and till date I have applied interest part for IT exception. How ever clearing by this out standing Rs. 9.8 lacs will be exempted my LTCG?
    5) The equal amt of LTCG will be use for purchase of PLOT will be exempted?
    6) The equal amt of LTCG will be use for purchase of FLAT will be exempted?
    7) The equal amt of LTCG will be use for purchase of old house will be exempted?
    8) The equal amt of LTCG will be use for purchase of agriculture land will be exempted?
    9) I want use this money for my daughters marriage after 2-3 years it will be exempted from LTCG?
    10) I am a private employ, under income tax, I have to file the returns for this transaction separately? Along with yearly returns I have to mention this transaction?
    11) If want to pay LTCG 10% to be paid for non indexed gain is accpepted ? I should pay by using indexed gain 20% ? or any of these two?

    Kindly give valuable suggestion from your side for my transaction and LTCG exemption?

    raju

    • Dear raju,
      1 – Yes, you can consider Cost of improvement (indexed) while calculating Capital gains .
      2 – Sale cost can be Rs 21 Lakh – Rs 1 Lakh (can claim brokerage expenses).
      3 / f/6/7/8- Kindly go through the above article. For calculations, kindly consult a CA..
      4 – No such provision is available.
      9 – No
      10 – Along with yearly ITR.
      11 – Indexed.

  • DEAR SIR,
    MY WIFE SOLD A COMMERCIAL PROERTY FOR RS1.30 CR.THERE WAS CAPITAL GAIN OF RS.90 LACS.HOWEVER SHE HAS PURCHASED REC BONDS WORTH 50 LACS AND PURCHASED PLOT WORTHRS 62LACS ON RESIDENTIAL PLOT AND KEPT 18 LACS OF TOTAL TRANSACTION BALANCE IN BANK IN LTCGA/C FOR CONSTRUCTION WITHIN TIME FRAME.
    1BUT NOW SHE DOES NOT WANT TO CONSTRUCT HOUSE WITHIN 3 YEARS.PL. ADVISE TAX LIABILITY AFTER 3YEARS.
    2IF ABOVE PLOT IS SOLD OUT AT THE COST OF PURCHASE AND CONSTRUCTED RESIDENTIAL HOUSE/FLAT IS PURCHASED WITHIN 3 YEARS WORTH 80 LACS THEN WHAT WILL BE TAX LIABILITY AND ANY PERMISSIN REQD. FROM ITO.

    • Dear Mr Mehta,
      1 – The unutilized amount in Capital Gains Account Scheme, will be considered as LTCG for that specific year in which time-limit expires and will be chargeable to tax as capital gains only.
      2 – I believe that one can invest the sale proceeds of selling a commercial property in a residential house only to claim tax exemption. If you have bought plot, you need to construct the house within 3 years.
      Also, If the new house is sold within three years, the deduction claimed will become taxable as a long-term gain.
      Another point to note is, 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.

      So, suggest you to consult a CA and take decision.

  • Dear Sreekanth,
    Thanks for the excellent guidance you are providing us.
    My query- I have a plot allotted in Year-1995, after that we paid EMIs & finally Registry of the same was done in 2004. Now I am planning to sell it off in year 2017. So, for calculation of Long Term Capital Gain(LTCG) do I need to get the Fair Market Value in 2001 of the land & then use Cost Inflation Index(CII) of 2001 & 2017 or the CII for 2004 & 2017 would be used to calculate the LTCG. Please Guide.
    Thanks!!

  • Dear Sir,
    My father have taken loan of Rs 12 lacs for purchase of house property in 2009,can the interest paid on the same be considered under cost of acquisition while selling the property.

    2 ) I have booked a flat at Lodha for 90 lacs , possession will be on 2020. I have only paid the booking amount and the flat is alloted and the registration is done . Now after 1 year i intend to sell my own flat for 60 lacs. and pay the proceeds for the new purchase property.
    My question will i be saved from long term capital gain under section 54 , as 1 year has already been lapsed since the allotment of lodha property.

    • Dear SHREYA,
      Yes, can be considered as cost of acquisition .
      As it is an under-construction property, “the new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)”

  • Hi Sreekanth,

    Greetings! I have a Query and need your guidance.I bought a flat in 2010-2011 for which i took a home-loan for 36 lac and paid 14 lac from my savings to builder as down payment. Till date i have paid 33 lack (Interest+ some part payments) and when checked with bank today they say that i have 20.5 lac of principle outstanding . I am paying emi of ~39000 per month as still i have 71 months due

    1)Assuming i sell this flat for 77 lac this year where transfer expense is ~1lac and home improvemnet cost is ~2lac, gross long term capital gain goes in negative…I am not sure if i am missing something in calculation.Can you please help to calculate based on the above said variable.

    2) Can i add up the total interest paid on home loan against transfer cost but i have availed income tax benifit till now.

    3) once i sell the Property say for 77 lac can i use the money for other investment options(FD+bondsMF) rather than buying a home again.What will be the tax implication if i am not investing in purchasing a home.

    4) Need your advice personally….which is beneficial…whether to sell this house and buy a flat again or to use the money for other investment options like FD etc…

    If i don’t invest again in buying a flat i will save the emi of ~ 39000 plus the interest that i may receive by investing the lump-sum amount~ 50 lac post paying the outstanding loan amount to bank and be loan free.

    Thanks in advance. This blog is really good and thanks so much for your effort and time spent in providing clarity.

    • Dear eswar,
      1 & 2 : There have been few court judgments in favor of claiming both tax benefits & as part of cost of acquisition regarding interest payments (borrowed capital) on home loan. So, your understanding is correct.
      3 – You can invest in FDs/MFs, but no exemption can be claimed on LTCG.
      4 – You are the best person to take investment decision based on your requirements 🙂
      Have you adequately invested or planned for your other financial goals?

  • Sir,

    I had constructed house in my native place in 08/1993 at a cost of Rs 330000/- . Now i am selling the same in 04/2017
    at Rs 5800000/-. How to calculate LTCG as per latest budget.

    Request your help.

    Raj.K

    • Dear Phani,
      As per budget 2017, the base year for calculation of Indexation is going to be 2001. This is the only change that is applicable to your case.
      The calculation procedure is as given under the heading ‘Long Term Capital Gains Calculation’ in the above article.
      Suggest you to take help of a CA and work out calculations.

  • Hi – I have purchased a flat in Hyd in 2006 for 15 Laks.
    Later i moved to Bangalore & purchased one more flat in Blr for 60 Laks with Housing Loan of 50 laks. I have occupied & staying in my Blr flat from 2015 June.
    Now i want to sell my Hyd flat for 40 laks & pay 30 laks amount towards my Bangalore property House Loan as part payment towards Principle.

    Can i claim Wealth tax exemption for the 30 laks part payment done to my 2nd Housing Loan.

  • Hi,

    I am planning to buy two shops (commercial property) in next one month. I have to make a down payment of 30% of the total value of the property, for which I am planning to avail a loan. I need to pay 70% of the value at the time of possession which is after 3 years. To pay 70% of the amount, I am planning to sell one shop and make the payment for the other shop from the sale proceeds.
    1. Can you please through some light, how can I save LTCG in this case.
    2. Am I eligible to make the payment for one shop from the proceeds of another. If I do so, is there any way in which I can still save LTCG. or do I have to invest the entire proceeds in residential property to save LTCG.

    Many Thanks in advance.

    • Dear Shilpi,
      In how many years after acquisition, you are planning to sell one of your properties?
      Are you planning to take loan for buying two properties, I am bit confused with your query.
      If you taking loan then you need to close one of the loans to sell one property, am I right?

      Also, the proceeds should not be invested in a commercial property, need to be invested in a Residential property only.

      • Thanks Sreekanth for your reply.

        I will get possession in around 3 years or 3.5 years max.

        I need to pay 30% of the total value now and rest 70% at the time of possession. So I am taking loan for both the properties but only for 30% of the total value. So suppose two shops are of 20 lacs each. Hence, I will take loan of 12 lacs only (30% of 40 lacs). I am planning to sell one shop at the time of possession. With the total amount received from the selling, I am thinking to pay off my loan (12 lacs) and also pay the rest 70% for one shop ( 70% of 20 lacs = 14 lacs). is it possible for me to do this?

        Since I have to invest the proceeds in residential property, is there any way out by which I can pay atleast 14 lacs (70%) at the time of possession and save LTCG tax also.

        • Dear Shilpi,
          It may all depends on what is the selling price that will fetch on your property that you are going to sell 🙂
          Suggest you to consult a CA in this matter (for tax calculation purposes).

  • Sreekanth,

    Great job from your side. I have a query.

    I read somewhere this and wanted to know your confirmation:

    Tthe exemption of LTCG Tax when you sell an existing property and buy a new one is only valid when you have 1 residential property.

    Details –> I have existing 2 house property. Sell one and and use this Capital Gain to give down payment of a new flat from this proceed.

    So will I get LTCG exemption in this case?

    Regards,

    Manav

  • I purchase a land in 1988 for Rs. 35000/-
    In 1989 i constructed a ground floor house for rs. 75000/-
    In 2012 i started renovation of the building and constructed 5 house in 3 floors which completed in 2014.
    i Took loan of 60Lacks for construction.
    In Oct 2016 i sold Entire land and bulding for 1.6Cr
    How to calculate Capital Gains?

  • Hi Sreekanth,

    Let me first thank you for making Relakhs.com quite an insightful website covering wide variety of financial aspects.

    We are residing in a flat in Mumbai purchased in 2003 on my name with ongoing home loan.

    In 2013, I and my wife jointly purchased another flat again on loan in my native Mangalore, which is still under construction. Completion date was end of 2015 but the project has been delayed and may take 2 to 3 years more for completion. ( honestly i dont know given the circumstances and trying to get out of this)

    Also my Wife owns a small land in my native which was gifted by her father abt. 2 years back.

    My plan is to sell the Mumbai Flat and to migrate to my native and build a house on the land which is in my spouse’s name.

    Now my question is what are the different scenarios & implications with recent 2017 revisions on property transactions and second house purchase as in my case and how best I can save on LTCG on sale of Mumbai House property.

    1. Can I combine the benefits of building a house in aforesaid land, as well as investing 50 lacs in Govt. Infra. Bond..?

    2. Is there any implication on the flat we purchased which is still under construction..?

    3. Can I add entire EMI component of the loan or only interest part while arriving at indexed cost of Mumbai flat..?

    Any inputs on this regard are appreciated.
    Regards.
    Jai.

    • Dear Jaikishen,
      There are two amendments in Budget 2017 wrt to LTCG on immovable property.
      Holding period for LTCG is 2 years only from AY 2018-19 onwards and the Loss under the head ‘Income from house property’ will be limited to Rs 2 Lakh only.
      Read: Important Direct Tax proposals in Budget 2017.
      I believe that you can use the LTCG for Construction of house on plot but within 3 years from the date of sale of property. You may also invest the balance (if any) in Bonds.
      Regarding Under-construction property , kindly go through this article..
      You can consider only Interest portion of EMIs towards Cost of Acquisition.

      As there are multiple transactions involved in your case, suggest you to consult a CA.

    • Dear pandu,
      Yes, She 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.
      As it is an Under-construction flat , the construction has to be completed within three years of the transfer of the first property.

  • My wife has sold (for Rs.20.00 lakhs)her plot 425 sqyrds in 2016 which was purchased in the year 2002(for 2 lakhs) for a profit of Rs.23.00 Lakhs and want to invest in buying a Flat under construction in 2017.(off course the flat cost is Rs.75.00 lakhs)
    Please tell me this would attract any long term capital gains????

  • Can I invest CG to make another floor on my single existing house and save capital gains? Please let me know.

    Thanks in advance.

  • I own a residential property in which plot was purchased more than one year back with home loan and construction was started in this FY 2016-17. I have used earlier LTCG of almost 15 lac (deposited in prescribed bank account) in construction of the house. I am yet to pay 10 lac more to the builder for construction. Now I have sold a plot in which i got LTCG of 50 lac. My queries are: If i can buy one more residential property and invest the entire proceeds to save tax. (at present i own only one residential property)
    If i can pay 10 lac to the builder for construction cost as construction is still ongoing to reduce proportionate tax. and i m sure i cannt save tax by repaying some house loan.

  • Hi Srikanth,

    I have brought an Apartment in 2007 for 17 lacs in my native.. Since then, paying the EMI from my salary.. Still i have outstanding of 14 lacs. In 2014, i have constructed a house and took the load of 20 lacs.. Struggling to pay these 2 EMIs.

    I have almost paid 12 lacs towards the interest to the bank since 2007. Which is from my salary and had already paid the Income TAX for the same..

    Now, I am planning to Sell the Apartment and pay the outstanding to the bank and remaining amount will pay towards my other loan.. Here are my questions..

    1. Is it feasible?
    2. Is it comes under Long term Captial Gain?
    3. EMI amount is from my Salary account, had already paid the Income tax.. Should i need to pay the tax for this?

  • My Grandfather has bought a Land in Delhi(80 sq yard) from DDA in April 1980 for Rs 1L.
    Over the period of 35+ years, we have constructed/renovated the house, which costs
    approx 40-50 Lakhs.

    Recently in Feb 2017 we have sold this property for Rs 1Cr.
    My Grandfather has two sons, we all are thinking to buy two house in Noida , each for one brother.
    Now my question are:
    1. Cost Inflation Index of 1981 & 2017 is 100 & 1125 respectively,how to add the construction/renovation cost
    (do we need to show the proofs of that) while calculating LTCG.
    2. As we get the money in Grandfather account, so to avoid the tax on LTCG, should the propery be bought in grandafther name only,
    or it can be in his son/grandson name ?
    3. If we buy the under constructed property in which possession commited by builder is after 2years, will we get the tax benifits of LTCG.
    4. Can I & spouse take the home loan tax benifts while buying the house along with grandafther LTCG ?

    • Dear AB,
      1 – There is no need to submit proofs/documentary evidence along with ITR, but you need to have them so that you can justify your stand, in case a tax notice is served.
      2 – Your Grandfather has to buy the property.
      3 – The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)
      4 – I believe that we have discussed this in Gift related article.

  • Hi, A house property was self accquired by my elder brother. Land Purchased on:20.02.1979
    Ground Floor Constructed on: 16.06.1982 First Floor Constructed on:12.10.1998(along with
    renovation on ground floor) On the demise of my elder brother, my bhabhi and her 3 sons
    inherited the property.(now 4 owners of the said property) These 4 owners jointly gifted
    the said property by a registered gift deed without consideration to me and my wife.

    The stamp duty was paid on the gift deed as per the circle rate valuation of Rs. 17 lacs.

    1. What would be our capital gain if the property is sold for 1 cr.?
    1. What would be our cost of acquisition? The cost of purchase of house by my brother in
    20.02.1979 was around 1 lac.

    There is another option proposed by the buyer of the property. He is willing to pay 75
    lacs+ give us a flat valued at Rs.25 lacs.

    3. How is the tax treatment of the flat given in exchange worked out?

    I intend to purchase a house in my sons name from the sale proceeds.

    If the property is purchased out of the capital gains in joint name of myself, my wife and
    my son, will it be given tax benefit?

    Regards,
    Rajesh

    • Dear rajesh,
      The capital gain (short term or long term) is dependent on the acquisition date on which your Bhabhi & sons, have inherited the property.
      For exact CG calculations, kindly consult a Chartered Accountant.
      As the property is gifted to you and your wife, if you re-invest the Gains in a new property, in the name of self+wife+son, the extent of Capital Gain exemption can be limited to your (self+wife) share in the new property.

  • I bought a flat for RS 20 Lakhs almost 10 years back and planning to sell for 49 Lakhs now , pending house loan of 12 Lakhs . Please let me know my capital gain tax. Do we have to give any proof for improvement expenses. Is the stamp paper and registration charges met during the purchase of the same is considered for deduction of tax. Please reply

    • Dear Anil,
      Yes, stamp paper & interest payments etc., can be considered as Cost of acquisition.
      For calculation of CG, suggest you to consult a Chartered Accountant.

  • Hi Sreekanth, thanks for this useful article.
    I’m confused about one statement: “If you use the capital gain amount to clear loans then tax on LTCG cannot be saved. No exemptions can be claimed.”

    I’m currently staying in a flat which i purchased in Oct 2013 (Flat 1). I’m having home loan outstanding for this flat. Recently I purchased another flat (Flat 2) (Registration date: Dec 2016, Possession date: May 2017). I’ve availed home loan for second flat which has started. I’ve made full payment to builder and home loan EMI is also started for full amount.

    Now, I’m planning to sell my first flat and shift to new flat in May 2017. For ease of explanation, I’m mentioning below numbers:
    1. sale price of Flat 1 – 40 Lacs
    2. Remaining Loan Amount for Flat 1 – 20 Lacs
    3. Capital gain on Flat 1 sell – 9 Lacs (as per table)
    4. Purchase cost of Flat 2 – 60 Lacs
    5. Home Loan amount for flat 2 – 45 Lacs

    I’m planning to use amount earned from sell of flat 1 after clearing home loan (20 Lacs), to reduce flat 2 home loan (i.e. from 45 Lacs to 25 Lacs).

    Now as per statement, am I eligible from capital gain tax on 9 Lacs? Please confirm ‘clear loan’ means reducing loan amount or closing loan account.

    Thank you.

    • Dear Manoj,
      If one uses the Long term capital gains to clear home loan, no tax exemption is available.
      You can use Rs 40 Lakh (Flat1 sale proceeds with LTCG) to buy a new Flat 2 and can save taxes on LTCG.

  • Dear Sir,
    I have two properties which I want to sell. The first one is a house and the second one is a vacant plot. The taxable amount of the house after indexation and calculation of LTCG will be about Rs 6 lakhs and that of the vacant plot Rs 46 lakhs. If both the properties are sold within one financial year and the sale proceeds are not utilized for construction / purchase of another house which of the following options is/are permissible under the law.
    1. 20 % IncomeTax is paid on the taxable amount of Rs 6 lakhs of first property and Rs 46 lakhs of second property is invested in NHAI/ REC bond so that the balance sale proceed of first property can be gifted to wife, children and sister.
    2. The taxable amount of Rs 6 lakhs of first property and Rs 44 lakhs of second property is invested in NHAI/ REC bond and 20% Income tax is paid on balance sale proceed of Rs 2 lakhs of second property so that lesser amount of tax is paid.
    3. Is it permissible to get both the properties evaluated by Authorised Valuer of IT Department and pay the IT on evaluated values of both the properties after indexation and calculation of LTCG.
    Kindly try to help.
    SC Patel

  • I HAVE SOLD MY ANCESTRAL PROPERTY, which came as my share measuring about 100 cents i.e. an acre. this was brought by my Grandfather in the year 1940 -1950. this is situated in Madduguude Village of Kundapur town in KARNATAKA. Since i AM STAYING INBENGALURU, i took the help of a local broker., who sold it as small plots.
    the amt of sale proceeds’is FOR AN APARTMENT IN UDUPI. My doubt is whether i should pay TAX ON IT FOR THE fy.. 2016-17 The sale proceeds are in Capital gain A/C. Kindly Clarify. WITH REGARDS.

  • My father owns a property (purchased at 70L in 2003) against which he has a loan (3 Cr). we are creating a gift deed that transfers the loan liability and the property to me. I am planning to accept the same and sell it for 5 Cr, in part to clear the loan. Will my basis be 70L adjusted for inflation + 3Cr loan for computation of capital gains or just the 70L adjusted for inflation?

    • Dear Rahul,
      As per few court judgments, an individual can avail dual benefits on home loan ie tax benefits as well as inflation adjusted cost of acquisition. Kindly consult a CA and take advice.

  • I am planning to buy a house & the home registry will be on the name of my Mom, My husband & Me. My Mom has a property in her name which she is planning to sell & we want to use that amount in this new home. We are taking home loan for this new home, my queries as below :
    1. Do i need my mothers name in home loan document also
    2. Once my mom sell her property can she invest the money on the loan amount

  • Hi
    My Long term capital gain on sale of property is appx 8 lakhs and the total sale proceeds is 18 lakhs. Do I need to invest the entire sale proceeds of 18 lakhs to Notified bonds or only the capital gain of 8 lakhs to avoid LTCG tax. Pls adivce.

  • Thanks for the article. It is simple and informative.
    I have a unique query. I have booked an under construction house under subvention plan from bank.
    Subvention of two years ends next year March. I plan to pay full loan amount before end of that period, so that I do not have to pay any EMI.
    On the other hand, my Father-in-law has sold a property last month and has parked money in Capital Gain account.
    My question is, can I sell my property to my father-in-Law on no profit and no loss, so that he avoids Long Term Capital Gain Tax and I also do not have any taxable gain.

  • Dear Sir,

    We currently have total 3 houses, out of which 1 house is of my Mother’s name (sole owner), second house is of Father’s name (again single owner); 3rd house is in join name with Me, My Dad & mom.

    Now, we are planning to sell the houses (12+years old) owned by my Mom & Dad respectively and we are going to buy another residential property (flat) for which I am taking a loan. Once we sell those two houses, we want to use that amount to reduce the loan or close the loan.

    We are planning to keep My mom’s name first, then Dad’s name, then mine in the agreement of new flat.

    How to save LTCG tax on this?

    Please advice.

    • Dear Sagar,
      The long term capital gains on sale of houses owned by your father & mother, can be used to buy the new property, and can save on taxes on LTCGs.
      However, the extent of exemption can be limited to the shares of their ownership (father & mother) in the new property.

  • i have sold my residential house to a promoter to build an apartment in which i will get a flat for my residence and a sum of money. will my long term capital gains be calculated on the sum of money only or the cost of flat will get included? or in other words will the cost of flat be deducted from capital gains as it will be my new residence.

  • I am NRI earning 30lakhs per annum from forign. I regularly trade in stock market equity derivatives (futures & options) from my Indian resident bank & trading account. I also have some rental income from housing property. I am filing ITR every year. Recently I sold a residential plot which was purchased in 1994. its LTCG applicable amount is nearly 6lakhs. My question is
    1. Is my income from employment can be shown as nil for ITR purposes
    2. Is derivatives trading profit/loss (speculative income) to be shown in short term capital gain/loss?
    3. Is LTCG can be offset against the loss incurred from the derivatives trading?

  • Dear Sreekanth Reddy,

    Thank you for presenting facts with such a clarity. I have a question for you.
    I wish to build a house for myself on a plot purchased and registered in my wife’s name ( who pays tax independently) in the year 1998. Hopefully the construction will be over in the financial year by March 2018.

    I also have another plot with small house built which I purchased in the year 2008 which is registered in my name.
    Now my question to you is that can I save capital gain Tax by deducting the cost of construction of the new house in wife’s name against the indexed cost of purchase of the 2008 house in my name?
    If so, by when should I sell 2008 property to avail capital tax benefit.

    I will be grateful if you could answer my query

    Warm regards
    SP Singh

      • Sreekanth

        Thanks for a thundering reply.
        What if the property was held in the same name?
        I mean can one construct a house……get it registered .. and then LATER sell the other property and claim exemption in LTCG category???

        • Dear Mr Singh,
          The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)

  • A small piece of Agriculture land ( 4000 sq. ft.) was purchased by my ex-husband on my name in the year 1995. I am a single owner of it. Total size of plot is 4000 sq.ft. but it was purchased from two separate owners who had given power of attorney to an Estate Agent. So Estate Agent made a single sale deed for it and mentioned total area as 4000 sq.ft. area sold for Rs. 75000/- and market value was quoted in sale deed as Rs. 1 lac 39 thousand at that time.

    NOW—
    1) Currently this plot comes under Yellow Zone area of Municipal Corporation. It is now residential area. Many houses and flats are constructed in that area. So even though sale deed is of Agricultural plot, (which doesn’t have Capital Gain Tax it seems) do I need to pay Capital gain tax if I sell it ?

    2) Can I sell it as two plots of 2000 sq.ft. each? (I don’t want to sell 4000 sq.ft. at a time (because most of the clients are asking for only 1500 or 2000 sq.ft. area. I want to wait few more years to get a better price for remaining 2000 sq.ft. and I need to buy a flat for myself by selling only 2000 sq.ft. in 2017 or 2018)

    3) How can I calculate capital gain tax? Should I consider total amount paid 75000/- OR 1 lac 39 thousand which was market price of 4000 sq.ft. at that time as mentioned in sale deed. So which price should be considered for calculation of indexed cost of purchase?? Rs. 75000/- or Rs. 139000/-???

    4) Suppose I sold 2000 sq. ft. for 60 lacs what will be tentative capital gain tax, if I need to pay it?

    5) What will be the time or period I get to buy a new property by selling this plot? If it is 2 years time and suppose I sold plot in Oct 2017, how should I count 2 years? I mean last date will be August 2019 OR it will be April 2019?

    • Little change in point 5 as below —
      5) What will be the time or period I get to buy a new property by selling this plot? If it is 2 years time and suppose I sold plot in Oct 2017, how should I count 2 years? I mean last date will be before 31 August 2019 OR it will be 31st March 2019?

  • Sreekanth,

    Your description on LTCG is quite informative.
    Please clarify
    I booked a flat in 2015. Registered in Aug 2015. Made final payment including banks final disbursement on 31st March 2016 and got possession on 31st March 2016. Now I am selling my other flat purchased in 2004 ( 13 years before). Can I offset the LTCG made on sale of this flat with the flat purchased in 2015/16? If you consider registration as a date of purchase then it’s already more than a year. But if I consider possession as date of purchase then it’s within a year. Logically you get a flat for use only after the possession date. Would appreciate your advise.

      • Dear Sreekanth,
        Thanks for the advise.
        But when I was talking to some CAs they were of different opinions. One CA said that since Registration document is the only authenticated document available with government ( since as per him the builder can give possession letter dated as per our convenience) possession date cannot be taken as date for offsetting the LTCG tax. Hence I am confused as to how do I file my returns whether to consider or not, with different CAs giving different opinions for the same situation. I wish to inform that the Occupation Certificate (OC) issued by Municipality bears date of 21st March 2016 ( this falls within one year before the date of sale of other property) which also should be an authenticated document. So one can easily know that possession date cannot be before this date even if builder’s possession letter is not to be believed. Hence please advise to help me file the returns accordingly.

  • Hi Srikanth ,
    My father purchased a plot in 1980 wants to sell for me for a nominal value for eg 1 lac ,can he do so
    Question
    1) Is selling of nominal value is valid or not both as pe IT Act and as per Law (Stamp duty will be paid on 10.Lacs but sale consideration is 1.00 Lac)
    2) Is my father do require to pay LTCG on this 1 lac or Market price say for eg 10 Lacs.
    3) If consideration of 1Lac is valid ,While calculating LTCG on 1.00 can we take consider /deduction of Cost of index , cost of improvement and cost of sale
    4) We don’t want to do this transaction with gift deed to avoid litigations

    Thanks in advance
    Regards
    B.MS

  • sir.
    My father build a house on 1993 in the name of my mother. Heard from him it costs 8-9 lakhs . My father died 5 years back. Now if my mother want to sale the house , how to show the cost at that time(9 lakh). No bill or any other parer left only cost of land from deed remain because that was 24 years ago. If dont show the cost how to calculate LTCG.

    please suggest…

  • Hi Sree,

    Nice Article!!
    Query:
    I have sold our NA plot at price Rs 1000000 on Date 16th jan 2017 which is purchased in 1990 (5000 Rs). Please suggest to exempt LTCG Tax.No plan to buy any other house/plot this year. Where should I invest to avoid LTCG 🙁

    Waiting for your kind suggestion.

  • Hi,

    Thanks for the detailed information regarding capital gain tax.

    I am NRI and about to sell my apartment for 50 lacs. LTCG will be applicable on 20 lacs.

    I would like to transfer 30 lacs to UK and buy new apartment in India of 20 lacs. Would I have to pay any CG this way?

  • Hello
    If I want to build a new house by utilizing LTCG earned through selling of a paternal property on a previously owned plot (in 2003),what r the rules,and can I do that for tax exemptions.i hv already opened capital gain account.

  • Hi,
    My Father in Law had an ancestral plot in Rohtak which his father bought in 1957. My father in Law doesn’t know it’s purchase price and has sold that plot @10.5 Lacs in October’16.

    He wish to invest the amount in buying a flat in his and my wife’s joint name.

    My question is:

    a) How much would be the exact LTCG on the plot acquired. (Please calculate and let me know)
    b) Will the LTCG be exempted if he buys the flat?

    Waiting for a quick reply.

    Thanks in advance for your reply.

    • Dear Anuj,
      a – Kindly consult a CA for calculation purposes.
      b – As he is planning to buy in joint name, the extent of exemption on LTCG is up to his ownership share in the new property.

  • Dear ,

    My mom bought a land for Rs. 20,50,000 / – and sold it for 22,00,000/- within 2 years which means STCG. So how much is the taxable income on this.

  • Hi Sreekanth,

    I bought a flat in May 2013 which is still under construction. I hope that I’ll get the possession by Dec-2017. 🙂

    1.) Now if I want to sell the flat before taking the possession, what are the tax implications? As I won’t be able to register the property. Do we count the time from the date I booked the property to the date I sell it or the duration gets started only once someone register the property on his name? I understand I need to pay the transfer charges to the builder.

    2.) What will be the tax implication if I sell the property just after getting the possession but before getting the registry done? I understand I need to pay the transfer charges to the builder.

    3.) I am not expecting to make any capital gain if I sell this flat within next one year. Now what all comes under capital loss? Whatever I paid to builder like BSP, Car Parking, Power backup etc. OR I can also show the interest paid to bank so far as capital loss? and yes indexation would be there if the clock started from May 2013.

    • Dear Tarun,
      1 – If you are planning to sell the flat before the registration/possession, the date on which you have signed the Purchase agreement is considered for calculation of capital gains, in this case it is Long term CG (booking date May 2013).
      2 – I believe that your builder might insist on registration to be done, before giving you a possession certificate., if you are selling the flat after taking possession of the flat, the period of three years (for long term capital gain calculation) starts from the date of taking possession of the flat.
      3 – Depending on Short term capital loss or Long term CL, you can set-off the losses.

      “Loss from transfer of a short term Capital Asset can be set off against gain from transfer of any other capital asset (Long Term or Short Term) in the same year.”
      “Loss from transfer of a Long term Capital Asset can be set off against gain from transfer of any other long term Capital Asset in the same year.”

      If there is still loss it can be carried forward to next assessment year. In the next year, the STCL can be set off against any gains from transfer of any capital asset (Long term or Short term) and the LTCL can be set off against gains from transfer of long term capital asset only. Any un-absorbed loss after such set off can be further carried forward to next assessment year. A loss for a particular year can be carried forward only if the income tax return for that year is filed by the due date. Capital loss computed in an assessment year can be carried forward for eight assessment years and set off as above.
      (Courtesy : bemoneyaware.com)

  • Hi,

    My father has sold an ancestral property. So it is a LTCG. Can the amount be used for renovation of existing property on his name?

  • Dear Sir,

    My father having one residential house which was bought in 1985. now we area selling it in 2017 and LTCG comes to Rs. 3.76 lacs. We have done some amendments to our home in 1995-1996 of around rs 2 lac but all transactions were in cash and no bills were opted as improvements are done through local contractor.

    Is it possible to deduct house improvement indexed and deducted from sale value without proof of bills or payment proofs.

  • Raj
    Hi Sreekanth… I bought a govt alloted residential plot 4 lakhs on the year 2007,,, paid thro EMI … I am selling this plot for 66 lakhs in 2017.. What is the LTCG?
    If I buy a plot and go for construction on it in this 2017 itself for 30 lakhs, pay back my debts 10 lakhs, What will be tax implication? How to avoid tax?
    Thanks
    Raj

  • Mani
    Hi sreekanth, I bought a plot for 36000 in 2006 and constructed a house worth1350000 total cost 1386000 if i sell it on 2017 for around 70L my capital gain after calculations may be around 30L then what about the balance 40L if building a new house costs me 45L balance 25L can be used for clearing my bebts, buying car or jewels or should i invest entire 70L for new house

    • Dear Manivannan,
      You can use the entire Long Term Capital Gain proceeds (Rs 30 L) on sale of a residential house to buy another house property (residential property) to save Capital gain taxes.
      As the new house cost is more than your LTCG, no tax is applicable.

  • If we sale 3 PLOTS and invest these money in purchasing a NEW PLOT for constrcting HOUSE in the name of MOTHER. Then exemption is available from all 3 sold plots or not from capital gains under any section.

    • Dear Sunil,
      You can buy a new property with the sale proceeds, but need to be in your name to claim tax exemption on LTCG (if any).

        • Dear Sunil,
          You have to pay taxes on gains received from selling of plots and then can gift the proceeds to your mother, who can buy a new property.

  • Hi Sreekanth,
    I bought a plot for Rs 25.5 Lakhs in June 2008. Now I have an offer for Rs 60 Lakhs. I assume I can show expenses of Rs 60,000 brokerage fee for the sale. Following the index table the capital gains = Rs 234160
    I have 2 questions:
    1. Can I add Rs 1 Lakh towards construction of compound wall to the site which I spent when I purchased it?
    2. Is my calculation of Capital Gain correct?
    I understand I have to get this transaction validated by a certified accountant, however I just needed a ball park number. Thanks in advance for your help!
    Bhagavan

    • Dear Bhagavan,
      1 – Yes you can deduct the expenses related to transfer of sale.
      2 – Yes you can add.
      If we ignore brokerage expenses & cost of improvement, below are approx figures;
      CII of the Purchase Year: 2008 month: Apr : 582

      CII of the Sale Year: 2016 month: Dec : 1125

      Purchase Indexed Cost:4929123.71

      Difference between sale and indexed purchase price: 1070876.29

      Long Term Capital Gain Tax with indexation (at 20%):214175.26

  • dear Mr reddy
    in case we deposit the amount in capital gains deposit account and utilise part of it by end of 3 years balance unutilsed will be taxed for capital gains. in which assessment year it will be taxed whether year of deposit or year 0f expiry of 3 years

    • Dear Venkatesh,
      The un- utilized amont will be taxed as long term capital for the financial year in which the specific period gets over.

  • Dear Mr reddy
    I have sold a redential plot 0n 15th june 2016.i wnted to buy REC bonds . so for i have not bought. 6 months period ends on 15th December 2016. Can the bonds be bought later than 6 months will exemption be available. otherwise what is the way i can save on capital gain tax.Is any grace period is allowed.

    • Dear Venkatesh,
      Kindly note that investments in 54 ec have to be completed within 6 months from the date of transfer of an asset.

  • Hello Mr. Reddy

    Can the proceeds from one property sell ( flat) be used to repay the home loan of second property without attracting CG tax ?

    • Dear Manoj,
      If you use the capital gain amount to clear loans then tax on LTCG cannot be saved. No exemptions can be claimed.

  • Hello Sreekanth,
    Please let me know following
    A- Is there any limit for Brokerage charges which we are deducting from full value of consideration as expenses for sale? If yes what is the maximum limit ?
    B- If i have paid calculated LTCG Tax in advance through bank challan before filling return and meanwhile i found any property and buy the same which is costlier than the CG, do i get the refund of the Tax i have already paid??

    • Dear Amit,
      1 – As far as I am aware of, there is no ceiling limit (but ideally they should be reasonable)
      2 – Very good question ! But, I am not sure about this scenario.

  • hello Sreekanth! I have a unique query, i couldn’t find any solution yet, pls help me.
    I have sold my house at 15 lacs and I calculated LTCG 12.5 lacs.
    now I m buying a house at 31.5 lacs, and I have applied for bank loan amount of 20 lacs, now if I pay remaining 11.5 lacs from my capital gain then i will still have balance of 1 lac. will it (1. lac) be considered as capital gain?

    now points to be noted –
    according to sec 54, my new house cost is greater than LTCG, so I am eligible for exemption LTCG tax.
    but
    does it make any difference or affect my eligibility if-

    1st condition – If i invest full LTCG (12.5 lacs) and finance 19 lacs to buy 31.5 lacs house.
    2nd condition – If i invest 11.5 Lacs from LTCG and finance 20 lacs to buy 31.5 lacs house.

    ????
    pls tell me what is the difference between both the conditions and how will it affect my eligibility of LTCG tax exemption.

    • Dear mohaneesh,
      As per section 54, the exemption amount is least of i) investment amount in new asset or ii) LTCG.
      If you are not utilizing your LTCG completely then balance amount is subject to taxes.

      ” If the purchase price of the new property is higher than the amount of capital gains exemption shall be limited to the total capital gain on sale.”

      So, you have the option to use the entire LTCG and can opt for financing option accordingly.

  • I will sale my old house of 2010 for 17L. What is my liability to pay tax and how do I reinvest or save tax.

  • SIR, I HAVE SOLD A PLOT (SITE) AFTER FOUR YEARS OF ACQUISITION FOR A CONSIDERATION OF 26 LAKHS. THE CAPITAL GAIN WORKS OUT TO RS. 22 LAKHS. SHOULD I DEPOSIT RS 26 LAKHS OR 22 LAKHS IN THE CAPITAL GAINS ACCOUNT AS I AM PLANNING TO BUILD A HOUSE ONLY IN SECOND YEAR. KINDLY ENLIGHTEN

    • Dear SHAM,
      You can deposit the CAPITAL GAINS (not entire sale proceeds) amount in a public sector bank or other banks as per the Capital Gains Account Scheme- CGAS, 1988.

  • Dear Sreekanth,
    I have a flat property purchased in 2004 for 3.82 Lakh ( registered value), But agreement purchased value is 11.0 Lakh. This is purchased by taking loan from HDFC for 7,50,000 and most recently paid 2.75 Lakh to HDFC to clear all dues and obtained documents.
    Now the same property I am selling it for 31.50 Lakhs.
    Please clarify regarding Tax implications and how to proceed.
    Thank you.
    Srini

  • My name two Residential Property one property sold and Sold Amount Deposited in Capital Gain Account.
    I have received Rent from Second Residential House under show in House Property Income
    allow to deduction in Capital Gain head (investment in New House)

  • 1.Can Long Term Capital Gain be calculated as the difference between the Sale Value and the current Valuation amount specified by the State’s Stamp Duty and Registering Auithority or Municipal Authority?
    2. If sl 1 is correct, then whether the indexation is required or not?
    3. Will Income Tax authority be satisfied on taxability on LTCG calculated as per sl.no.1 ?

  • Hi Sreekanth,

    I am planning to sell my house for 17.5 lakhs and want to distribute this money between my daughter and son. Will i or they be charged any TAX ?

  • Dear Srikanth, on your advice, I refused to accept the two demand draft. The sale is therefore cancelled. However, I have another customer who asks me to strongly reduce the price under the pretext of the demonetization. So I would like to have your valuable advice: the demonetization did – it significantly lowers the price? Do you think I should I wait next year to sell my house? I can’t sell off as it my house which is located in a chic, downtown and much in demand. The price is around 20,000 Rs Sqft. I ask only 15 000 Rs Sqft because the brokers tell me that I can’t sell more because it’s a street of 25 feet and dead end. Thank you very much in advance for your valuable advice.

    • Dear LAMBERT,
      The expectation in the market is that the land prices/property prices may scale down. But it may take time to see the effect may be in next 6 to 12 months we can see the impact. But personally I believe that the impact can be high w.r.t Flat and may be less on land prices.
      Also, the home loan rates can decrease further, this can fuel the construction activity again after a brief slowdown (may be in next 1 to 2 years).

  • Hello sir ,

    I have purchased a land for 3L in 1996 and sold it in 2016 for 45L . And I am planning to buy a residential land with this amount.Also I have a residential flat (which was purchased in 2002) registered in my name.can you please let me know whether I am eligible for tax exemption through section 54F ?

  • dear sir please tell me that if i received a land from my ancient under will or after my fathers death now i sold that land so in case whit is tax i have to pay whether i can get the benefit from the indexation of the property nd the land is a long term property

    • Dear mohit ,
      Yes, you can get the indexation benefit.
      When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.
      Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
      Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.

  • Dear Mr.Reddy,

    Thanks for the educative article. It helped me a lot.

    I have a query:

    Can VAT & Service Tax paid to the builder at the time of acquisition be calculated in the cost of Acquisition. Also, can Transfer fees paid to the society(to obtain the society’s NOC) be deducted from the entire sale consideration.

  • Please confirm. We have sold a residence plot for 21 lacks and 50 thousand. We can invest in NHI/REC bonds.

    • Dear Baljinder,
      Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.

  • dear sir, i am planning to purchase a house now by taking bank loan of one cr. after 10 months i will sell a land which will get 1.25 cr of LTCG. Will i be able to use that LTCG to pay my house loan to save tax

    • Dear Uttam,
      I believe that the exemption wont be allowed if the Capital Gains is used to repay the loan.
      Capital Gains should be invested in another property to claim exemption

  • dear sir, i bought a plot in the joint owenership of me and my wife. now can we invest the LTCG in two different properties, one in my name and another in wife’s name?

  • Dear Sir, Can I use the proceeds from LTCG for the purpose of my children’s higher education within India or outside India after I have deposited the proceeds in CGAS (within 3 years)

  • I AM HAVING ONE RESIDENTIAL HOUSE JOINT NAME WITH MY WIFE. NOW I AM THINKING TO SELL ONE INDUSTRIAL LAND. CAN I BUY ANOTHER NEW HOUSE-FLAT ON MY SINGLE NAME AND SAVE LONG TERM CAPITAL GAIN. IF GAIN IS MORE THAN CAN I USE BOTH OPTION BY INVESTING IN ELIGIBLE BONDS UPTO 50 LACKS AND BALANCE IN NEW HOUSE ON MY SINGLE NAME.

  • Respected sir/madam,
    I have purchased a plot in 2009-10, and in 2015 a house get constructed on it, now while calculating capital gains …. construction costs will be taken as cost of improvement? And will get indexed ?
    Kindly help

    Sarita Pandey

  • Sir, My dad had bought a house in 2004 but we didn’t register the property at the time of purchase, the registration was done in 2016. Now we want to sell the property and take another house form the money that we will receive. So will the sell be considered as “Short term capital gain” or “Long term capital gain”?

  • Sir,I sold my plot of land purchased in 1982 for Rs10880/- for Rs3960000/- on 12-4-16. I could not invest it in NHAI or REC bonds within 6(six) months. Can I invest a portion of the capital gain in the bonds to save tax now after 6 months and before end of this financial year?
    Please clarify and guide me how to save LTCG Tax.
    Regards
    Mohanti.

  • Hello sir…. 4 years back, I bought a land costing rs. 700000 now it’s value around 20,00,000. Now I’m looking to purchase a new flat by selling that land. Would I be qualify to take exemption under 54F, as I’m not owning any house property yet.

  • Hi Srikanth,

    As amended by Finance Act, 2016 still the 54, 54EC, 54F are valid from this financial year?. I can’t find any of the details in the income-tax website, if you have any link it will be of great help if you can forward that.

    Regards
    BSREDDY.

  • Hello Shreekanthji, I have purchased a open plot in the year 2005 and now i want to sell it. Can i save the capital gain by investing the same into another open plot. The plot is in the name of my mother who is 62 age.

    • Dear SS Bale,
      LTCG exemption can be claimed if you would like to construct house on the plot within 3 years.

  • Dear Shreekanth Jee,
    Please note, last year, my wife purchased a residential plot 30×40 for Rs. 4.0 lakhs and had to sold it for Rs. 10.0 lakhs , by seeking better plot in the same city. Immediately we purchased another plot for the 9.0 lakhs. We do not have own home and seeking to build, by arranging suitable amount by savings or bank loan. Pls guide us further on how much Capital gain tax applicable and what to do for the Exemption . Thanking you

    • Dear Kishan,
      STCG is applicable for sale of Rs 4 Lakh plot.
      There are provisions available to save taxes on STCG.
      Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.

  • Dear sir,
    I will be highly obliged if you guide me.I am a senior citizen.I had sold my flat in Mumbai in Nov.2014 &at that time only,I purchased a very small plot in Gujrat.The construction was completed in Nov.2015.Now,I want to sell this house.To save on short time capital gain tax,can I sell it after Nov.2017?If I sell it now,what will be the tax payment?

    • Dear Mr Bhamgara,
      Yes, you may sell it after Nov 2017, LTCG if any has to be calculated.
      If it is sold before 3 years, Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.
      Did you claim any exemption during the sale of first property (Flat)?

  • Hi Sreekanth,
    I had a piece of agriculture land gifted by my grandmother in 1987. Now I had sold the land in way of house sites(plots). Half of the plots have been sold and I have received 10 lakhs from it. I am planning to buy a flat for that amount next month. Please let me know do I need to pay tax for the amount. If yes, how I save it. Thanks

  • Hello Sreekanth, I have a piece of land and I gave it to a builder who will build a G+2 apartment. As per our agreement, the builder will give me a 3 bedroom flat and also he will pay me 15 lakhs in three installment. Please tell me do I have to pay tax on that 15 lakhs amount. If yes, how can i save my money from taxation. Waiting for your reply. Thanks in advace.

  • Hi Sreekanth,

    I have sold my flat for 25 lacs this year in august 2016, which i had Purchased in 2010 for 10 lacs. So i have deposited the whole 25 lacs amount as a fix deposit in my saving account. I want to use this amount for purchasing another apartment in Delhi in 2017. So my question is CAN i hold this Rs 25 lacs amount in my bank account without any tax(property Sale tax etc).?? and for how long i can hold this amount in my account?.
    Request you to Please clear my doubts.

    Thank you very much.

    Regards/Mukesh

    • Hi Sreekanth,
      I and my son bought a land for Rs 15 lac. I contributed 10 lac and my son 5 lac. We got the land registered in the name of my wife and my son jointly.
      Who is the owner in the eyes of law?
      Thanks.

    • Dear Mukesh,
      The time-limits have been mentioned in the article and they vary from Section to Section.
      For ex- “Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.”
      The interest income from Saving Account is chargeable to tax if it is beyond Rs 10,000.

  • Hi -thanks for your info!
    For LTCG, if the tax bracket is within $75,300, there will be no tax. Is the $75,300 before or after adding the gains?

  • Hello Srikanth,
    My mother has a residential property. If she sells it and part of it gave to me for purchase of a new Flat on my name only. Will it be suffice to save LTCG on part which she has gifted me or in that case who will have to bear the LTCG, me or my mother.

  • Hi I had purchased a flat in Jan 2013 for 9 lakhs… If I sell it for 27 lakhs now what will be ltcg and how to avoid tax….

  • Hi, If I sell a commercial property for 80 lacs purchased in 2009-10 for 9.38 lacs. While calculating the Index value can I add up the extra constructions cost I had done on the land. Do I need any document to confirm the value and period of construction(I don’t have any as it is an industrial property and have constructed storage shed for 5.00 lac in 2010-11.
    Now the selling price 80 lacs is including the machinery(purchased in 2010-11 for 5 lacs). Will I need to pay LTCG on the machinery value also.

    Could you let me know approx LTCG

    Purchase value – 9.38 lacs in 2009-10
    Other expenses(registaration etc.) – 0.80 lacs in 2009-10
    Construction of shed – 5.00 lacs in 2010-11
    Purchase of machinery – 5.00 lacs in 2010-11

    Selling land with machinery – 80 lacs
    I have already claimed depreciation for the machinery from 2011-12 upto 2015-16

    Regards
    kumar

  • Hi Sreekanth, I going to sell my plot on 20th November 2016 for 35 lakhs(Registration value 5.75 lakhs) which I had purchased in October 2014 for 30 lakhs (Registration value 5.75 lakhs). Please advise me while opening STCG, do we need to submit old registration document and new registration documents to bank? Why I am asking is, If we submit the documents, there is no profit on plot. or direct we can deposit 35 lakhs? please advise.

    • Dear srinivas ..Considering what is happening with black-money cases, do you think that it is wise to have accept such huge amount as accounted money? Isn’t it going to be tough to convert that money to white?

      If you have to deposit Rs 35 Lakh in bank, they may ask you the source of income for this transaction? In such a case it is difficult for you to justify your stand.

  • Dear Sir,
    I have sold on nov 2016 my residential plot for 26.5 lakhs which I had purchased in oct 2010 for 10.5 lakh. Now I am going to purchase a new residential plot for 23.5 lakh on 30 Nov 2016. Please suggest what will be my LTCG and how to save tax on it.

    Regards

    • Dear Vikas,
      You have two options ie Bonds u/s 54EC or can invest the amount in CGAS to save your LTCG on sale of plot. But if you invest the proceeds only in plot then is no provision to save taxes on LTCG.

  • I purchased a flat for 3 lakhs and after 15 years I sold it for 22 lakhs. With that capital gain amount and some more from my pocket I purchased a PLOT of 40 lakhs. Will I be taxed if I do not construct a house within 2 years ? If not, then how many years can I take for constructing a house without getting taxed. I do not have any bank loans and I do not want to take any loans. Thanks.

    • Dear Sohail,
      If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. Do note that ‘cost of land’ can be included in the construction cost.

  • Hello Sreekanth,
    I am a single lady of 50 years living in a rented house and my father who passed away in 2013 left his apartment to me and also a 40% portion of a residential plot of land for me and 60% for my brother.
    The land and flat were bought before 1984. The flat was bought for approximately 5 lakhs back then and is quoted at 4.5 crores now. I have no intention of selling the land right now but I want to sell the flat and buy an independent house for about 3.5 crores in another town or city within two years and keep some of the sale money aside, say 1 crore for investment in FDs or mutual funds and to meet some expenses. Could you please tell me what would I have to pay as tax for this sale. Will the buyer deduct TDS and if so how much and can I claim it back as my income is below 5 lakh a year? Any suggestions are welcome.
    Thanks.

    • Dear Deniese Ji,
      The buyer has to deduct 1% as TDS on the Registered Sale value of the property. Yes, you can claim it back when filing your Income tax return.

      Yes, you can use the entire Long Term Capital Gain proceeds on sale of a residential house (Flat) to buy another house property (residential property) to save Capital Gains tax.

      You may this calculator to find out approx LTCG on sale of Flat.

      • i have purchased a land of Rs 1000000 in the year 2005 & sold the land in the year 2016 for Rs 2500000 is it taxable or not and how to save the tax

        • Dear ajay ..Tax on LTCG is applicable.
          To save taxes – kindly refer to the points given in the above article.

  • Hello,

    I want to know about the capital gains tax effect in my following case.

    In 2008 my mother and I sold our individual plots. Out of the combined proceeds we constructed a single bungalow in the same year. Due to funds deficiency, we had to take a loan in my wife’s name. So we registered this new bungalow in the joint ownership of myself (i.e. son) and my wife (i.e. daughter-in-law). My mother’s plot sale proceeds are invested in this bungalow, but her name in not in the registry. My mother resides with us only. Can you please guide me w.r.t. to the capital gains tax in the hands of my mother.

    Regards

    • Dear Yogesh,
      You may treat the amount given by your mother as Gift, which is tax-exempt.
      Did she pay taxes on sale of plot in 2008?

      • Hello,

        Thanks for the reply.

        My mother did not pay any taxes on sale of plot. I want to know if she is liable to pay any capital gains tax, even though entire sale proceeds are reinvested in my (i.e. son’s) bungalow?

        • Dear Yogesh,
          Had she gifted the Plot to you and if you had sold it then onus of paying capital gain taxes (if any) would have been on you.
          She had sold it – so capital gains (if any) should have been paid by your mother. After the sale transaction, she has gifted/invested in the bungalow.

  • Hi ,
    I have sold my agri.land in oct-2016 for 22.5 lakhs was purchased 12 years back. recentlly i hv brought a flat in city of 5125000 can u tell me how much tax i have to paid. i already paid 1% tds amount on sale of property.

  • Hi, I have bought a small piece of land with personal loan of 4.5 lakhs land value in 2006 and paid a loan amount of total 6.5 lakhs. Now the selling price is approx 16 lakhs. what is the tax i need to pay. Secondly i am planning to use this money fully to buy an agricultural land for 25 lakhs. Can you please tell me the tax i need to pay.
    I also have 1 house loan and 1 plot loan, which is the best way to use the money.

    • Dear Sandeeth,
      Kindly note that Capital Gain Tax cannot be saved if the sale proceeds are invested in agricultural land.
      You may use the ‘LTCG calculators’ which are available online by searching in Google.

  • Hi ,
    I have sold my house for 20 lacks last year which was purchased 8 years back. and I gave that amount to one of mycousin who is in construction field .. for Rs.1.50 paisa .. is that 20 lacks amount come under black money and that amount is taxable…

    • Dear Venkat,
      Was that Rs 20 Lakh amount white-money? What was the registered value (sale transaction)?

  • Hello,

    I am selling my Plot/Land for 15 Lakhs and I want to pay my Home loan which was taken 2015 year.
    is the money received from Plot/land selling in Taxable. Please let me know.

    • Dear Deshpande,
      There are conflicting view-points on this.
      Some tax experts believe that one can claim such exemption if both the properties – provided you bought and availed home loan on residential property within a period of one year before the date of sale of the old house.

      But here in your case, it is not residential house .

  • I am selling my house. A buyer wants to deliver me two demand draft, the first compared to value guidance, the second check on furnitures, amount around 1.8 Cr. Is this legal? What is the amount of the income taxes on each demand draft? Thank you for your help

    • Dear Lamber..May I know that is ‘property registration value’ going to be? Is it going to get registered for the entire amount?

      • Dear Sreekanth, buyer to pay less registration fee want to give me two Demand Draft. The first Demand draft in relation of guidance value for the property, and the second demand draft for furnitures. But the second Demand draft amount for furnitures well beyond the first DD relative to the amount of the property. I think it’s illegal. I would pay more taxes in place of the buyer. Supplies of my house hardly exceed 2 lakhs. I have not accepted yet pending your comments. Thanks

      • Forgive me, I think I now understand your question. I bring you the accuracy. The guidance value is 5 600 Rs square feet. The buyer therefore gives me the sum of 1 Cr 77 lakhs Rs 85 600 for the property by a first DD. Then he gives me a second DD for furnitures amounting to 2 Cr 57 lakhs Rs 14 400. I think that there will be two dead sale, one for the property and one for the furnitures. You can see that the amount of supplies exceeds the cost of the property while the actual price of the property is 4 Cr 35 lakhs for 3 176 sqf. I think it’s illegal. The buyer does not want to legally pay the registration fees for the total amount of 4 Cr 35 lakhs but only for 1 Cr 77 lakhs Rs 85 600. I think it’s me who should pay taxes in his place. It’s dishonest. What do you think? Thank you so much for your response.

        • Dear Lambert,
          Kindly do not get into such transactions. I am sure you are aware of the latest developments w.r.t to black-money etc., So try to accept the whole amount as White money and get the property registered for the entire amount (if you can find such buyer)..

          • Dear Sreekanth Reddy,
            That’s what I thought too. Thank you very much for your clear and accurate answer.

  • Hi Sreekanth, have one query, I am going to sale 2 residential plots in my name which I purchased in year 2006 and 2008. The LTCG part is about 18 lacs out of 28 lacs of sale proceeds of both the plots. I am going to buy 2 plots again out of entire LTCG i.e. for about 18.5 Lacs. I am staying in my own flat bought in 1996, and do not plan to construct house on the 2 new plots I am buying. Can I save LTCG?
    Will it make difference if I buy new plots jointly in name of me and my wife?

    Second part if query is I had booked a new flat in 2011, for which I have already paid 90% and will get possession by the end of 2017. Can I utilise this LTCG against this flat. I shall also sell my old flat after getting possession of the new flat.. So either I should utilise LTCG which will arise by selling the old flat.
    Request your guidance.

  • HELLO SIR, I HAD SOLD MY FLAT FOR 38 LAKHS AND PAID ABOUT 3.70 LAKH ARREAR OF MAINTAINENCE AND COMMSION OF SELLING HOUSE AND DEPOSITED BALANCE AMONT IN CAPITAL GAIN ACCOUNT. NOW I AM PURCHASING HOUSE FOR 42 LAKHS AND I HAVE TAKEN LOAN OF 12 LAKHS, WHERE AS I AM MAKING PAYMENT OF 30LAKH FROM MY CAPITAL GAIN ACCOUNT & 12 LAKHS FROM BANK LOAN AND I AM LEFT WITH 4 LAKHS IN MY CAPITAL GAIN ACCOUNT. CAN I USE THESE 4 LAKHS AMOUNT FOR REGISTRATION OF HOUSE AND WOOD WORK. PLEASE REPLY.

  • Dear Sir,

    Does purchase of farm house plot and construction to the tune of 0.4 FSI as per allowed FSI rules for farm house plots qualify to offset the LTCG against proceeds received from the sale of a residential property.

    Kindly clarify.

    • Dear Ramesh,
      Kindly note that as long as both the properties are i.e. property sold and the property bought to save capital gain tax are residential properties (not used for commercial purposes), can claim tax exemption on LTCG.
      Kindly consult a CA.

  • Dear Shreekant,

    My father has recently purchase a property for Rs. 40 lacs.
    He is also planning to sell another property within a year. The sale process will be approx. 80 lacs. He has purchased this property in year 2000 for Rs. 9 lacs. Now my queries are:
    1 . >> How much LTCG will arise
    2. >> Can we set off LTCG against purchase of a property which we have purchased last year.
    3.>> If still some LTCG remains for set off , then is there any way to save LTCG

    • Dear Nikhil,
      1 – LTCG can be around Rs 55 Lakh (Sale price @ 80 L in 2016-17 and Cost price @ 9 Lakh in 2000)
      2 – Rs 40 Lakh one – May I know what type of properties are these?
      3 – You can invest in 54EC Bonds (kindly refer to the points in the article).

  • Hi Sir
    We brought a flat at 1.18 Cr in JAN 2016. Some reasons we need to sale the flat , selling price for it will be around 1.25-1.30 Cr.
    During purchase loan was availed from LIC of about 86 lakhs
    Own investment was – 32 lakhs
    Plus registration / stamp duty

    Now if we sell the flat, can we save the STCG in any form and what would be approximate tax value?

    • Dear Shivani,
      There are no provisions to save taxes on STCG.
      The tax amount depends on the income tax slab rate that is applicable to you.
      “Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.”

      • What will be the short term capital gain incurreed? Is the initial registration + brokerage charges exempted from the gain
        Selling price is 1.26 all inclusive of registration

        • Dear Shivani..You can deduct ‘cost of transfer’ on sale of property.
          Cost of transfer is a brokerage paid for arranging the deal, legal expenses incurred, cost of advertising, etc.

  • Dear Sreekanth
    I have the following property
    1 ) Ancestral property built my father in 1976 ( say A ). After our parents demise , we ( 4 siblings ) found a buyer and done an agreement with the buyer to sell the property on 10th July 2016. We got 90 % on agreement in July 2016 & we will get remaining 10 % on transfer of property to the buyer ( i.e registration in buyers name ) .I got in my name a share of 36 lakhs ( 90 % ).The transfer may be possible in this FY or in next FY .
    2 ) I & my wife purchased a flat ( Say B ) in joint name , the registration ( Transfer ) done on March 2016 . The tax benefit on bank loan was taken by me . The entire bank loan was prepaid by me in June 2016 .
    My Questions are >>>
    A ) How the LTCG will be calculated on property A since cost inflation index started from 1981 /82 . Is there any process or the entire amount will be taxable ?
    B ) If I want to take tax exemption of LTCG either by purchasing property ( within 2 years for new property or 1 year back for purchased property ) or investing in bonds ( within 6 months ) ,will the day count be started from July 2016 ( for 90 % or for 100 % ) Or it will be counted after transfer .
    C ) Can I get the tax exemption of LTCG by showing it against property B ( because :it is in joint name , already transferred just 5 months back from July 2016 & the bank loan prepaid before July 2016 ) .

    • Dear Man mohan,
      A) As the property (A) was purchased prior to 1980, you can visit the registration office to get to know the Fair Market value of similar properties in the same locality during that period of time (OR) you can consult Govt approved ‘Valuer’ to arrive at and certify the Fair market value and issue you a document.
      You can then use this FMV and index inflation number at base rate ie 100 (1981) and then calculate LTCG.
      B) Agreement of Sale can be considered as date of transfer.
      c) This is tricky, as you have bought the property using home loan. Suggest you to consult a CA.

      • Dear Sreekanth .
        Thanks for the reply , i decided to invest the entire amount in LTCG bonds .I received 36 lakhs ( 90 % )on signing the agreement on 10/7/2016. I will get the remaining 4 lakhs ( 10 % ) at the time of transfer of the property .The transfer is on process & may be done in FY 2016-17 or 2017-18. What will be the limit date for 36 lakh & remaimg 4 lakh ?

        • Dear Manmohan ,
          You need to invest within six months from the date of sale of capital asset.
          So, it depends on the Date of Registration.

  • Dear Mr. Sreekanth Reddy,

    My friend earned Capital Gain of Rs. 75,00,000/- on Sale of Residential House Property (after netting off indexed cost of acquisition). He invested Rs. 50,00,000/- in long term specified asset (Bonds of NHAI) and balance amount of Rs. 25,00,000/- in SBI Capital Gains Accounts Scheme. Is this eligible for full exemption from LTCG.

    • Dear Pravin,
      Yes, eligible.
      But kindly note that CGAS is a stop-gap arrangement only, as the funds have to be used to buy or build a house within the period specified. Kindly note that interest earned on this account is taxable.

      • Sir,

        Thank you very much for your response.

        However, while finalizing Order u/s 143(1), CPC has not considered the full amount u/s 54EC (They have considered only Rs. 50,00,000/- of NHAI Bonds). Whether both (i.e. NHAI Bonds and Capital Gain Accounts Scheme) are eligible u/s 54 EC or both are to be mentioned under different sections in the ITR.

        Thanks n Regards

        Pravin

        • Dear Pravin..I believe that there is no separate section for claiming the amount invested in CGAS account. The interest earned on this account has to be added to the income earned from other sources and taxes have to be paid accordingly.

          Whenever you file your income tax returns, you will need to furnish a proof of your CGAS bank account to get tax exemption. A proof should be attached along with your ITR form for each financial year.

  • Dear Sir,

    My father bought a land in 1976 at a price of Rs 10000/- only. We have sold it this year at a price of 15 lakhs. We are planning to buy another plot, price of which is approx 20 lakhs. Now my query is as the purchase cost of new land is more than the selling price of the old one – a) Do we need to pay any LTCG tax? (b) In case of land if the purchase price of a new land is more than the selling price of old land and if we do not build any residential house within the 3 year time frame do we need to pay any tax (as the above article says building a residential house only helps in saving the LTCG tax…)?
    Thanks in advance.

    Rajarshi.

    • Dear Rajarshi,
      a – No.
      b – Yes, the construction has to be done within 3 years. Else, the LTCG claimed earlier will be added to your income and has to pay tax as per your income tax slab rate.

      • Dear Shreekantji,

        After sale of property we think to save capital gain but here my query is before sale if i purchase a residential plot out of advance taken from party to whom i suppose to sale my residential plot adjacent to him after six months. can i get capital gain tax exemption anyway for above transaction sale and purchase of propertry ? kindly clarify.

        • Dear Mr Rao,

          If the purchaser has paid the full price and has taken the possession of property then you can use the proceeds to buy a plot and then has to construct a residential house within 3 years of sale of first property.

          “Section 53A of the Transfer of Property Act envisages situations where under a contract for transfer of an immovable property, the purchaser has paid the price and has taken possession of the property, but the conveyance is either not executed or if executed is not registered. In such cases the transferer is debarred from agitating his title to the property against the purchaser.

          The act of giving possession of an immovable property in part performance of a contract is treated as ‘transfer’ for the purposes of capital gains. This extended meaning of transfer applies also to cases where possession is already with the purchaser and he is allowed to retain it in part performance of the contract. “

  • Hi further to my question asked below since in my case LTCG exemption will be reversed

    1) now does it means that I will have to pay tax on old house sold. Sale price – cost price x 20% LTCG

    2) or is it sale price of new house – cost price of new house x tax slab rate

    3) or is it sale price of old house – sale price of new house x tax slab rate

    Request your help on both the questions as confusion arises due to selling of new house within 3 years

    • Dear Dheer,
      If the new property is sold within a period of three years, the earlier LTCG exemption claimed with respect to the old property shall be revoked and the capital gain on old property becomes taxable at the income tax slab rate that is applicable to the individual.

      (The calculation is done like this – The entire LTCG on sale of old property will be deducted from the cost of acquisition of your new property and you need to pay tax on STCG gains at the tax slab rate).

      • thank you sir, i still have doubt on cost of acquisition so.better i give break up as below of entire case.

        Old house agreement cost : 72880 Aug 1999
        Old house sale cost : 2500000 June 2013
        LTCG 72880 * 939/389 = 175924-2500000=2324076

        New house agreement cost 2492100 Dec 2013
        Stamp duty 149256
        Reg 28921
        Other charges like clubhouse , maintainence , developer charge , service tax Vat total = 329846
        Total cost of new house : 3000123

        New house resale agreement value : 3150000 date July 2016
        no expenses incurred while selling

        here what will.be cost of acquisition on new house
        1) agreement value 2492100
        2) agval+stamp+reg= 2666700
        3) or total cost paid 3000123

        some.say maintaimce club cjgs etc are not to b included

        2) i am jobless and no salary income till now in this FY. i domt want to.risk proceeds runming out
        can i pay tax on above txn now and say if i get job rest later

        3) i witdrew 2.9 lacs fromy ppf account in aug 2016, now can i put back 1.5 lac back to claim deduction from above txn
        thanks

        • Dear Dheer,
          Since you have sold the new property within 3 years, the acquisition cost of the new house will be agreement value + expenses – LTCG on first property. So, your Short term capital gains in this FY will increase and the taxes have to be paid as per the applicable IT slab rate.
          2 – Taxes have to be paid in this FY 2016-17 (AY 2017-18).
          3 – I did not understand your query. Did you withdraw PF before 5 years of service?

          • Sorry sir its still unclear to me.what happens to the value at which i SOLD the new house? will it not appear in any calculations.

            So if
            purchase Cost of new house= 2666700 minus
            LTCG = 2324076

            it comes to 342624 this is tax amount i have to pay or is it the amount ON which i have to pay tax=9539 as per my slab

            I am under impression that i have to deduct the differnce from the SALE value of new house i.e 3150000-342624=2807376 on which my tax will be 687209

            2) what i meant was can i pay the tax say next month so that i dont risk running out of money at year end as i have no income.
            3)I withdrew from my PPF account not PF

            Thanks

            • Dear Dheer,
              If your new property acquisition cost is Rs 26.67 Lakh then deduct LTCG on first property ie Rs 23.24 Lakh which is Rs 3.43 Lakh.
              The sale value of new property is Rs 31.5 Lakh so STCG is Rs 31.5 Lakh – Rs 3.43 Lakh which is Rs 28.07 Lakh.
              You have to pay taxes on this STCG at applicable slab rate.

              2 – If the tax liability is more than Rs 10,000 you have to pay advance tax now itself, else you have to pay penalty + tax liability when filing your Income tax return. Kindly take help of a CA.

              • Ok sir now I got the calculations now BUT BUt still not sure whether to also deduct clubhouse charges , advance maintainence, , , development chgs vat and service tax as mentioned above from purchase value of new flat 31.5 lacs

                Also I am yet to receive sales proceeds from buyers bank, expecting the same within 10 days , so when do I pay advance tax and can I deposit amount in PPF , claim deduction while paying this tax.

              • greetings mr.reddy,
                i contacted a local ca here his views differ very much from above as under
                1) he says pay 20.6% tax on.ltcg of first propery i.e 23.24*20.6
                2) as for stcg 31.5 – 300123(total cost of acq of new house, not 26.67 in above example=149877 which is not taxabke since below exempt limit as i habe ni income as of now.
                in a nutshell he has not clubber old house and new house txn togegher.
                isnit appropriate?

  • Sir,
    plz suggest. my father built a house in the year 1992-93 ,costing abought 1000000. Now if he sell this house for 7000000. the capital gane= 7000000-(1000000*1125/223)=7000000-5044843=1955157.
    I thought that he can go for bond of rs 1955157 and remaing rs he can gifted to me..and i can bought a new flat.
    but my adviser said he cannot gift the amount to me, my father have to purchase a new house in his name and the remaining amount( 7000000-New flat price)he can go for bond,
    or he can give tax 20% on 1955157 and remaining he can give to me.
    Is it sir?

  • Sir I cannot find a single article on net what if say I sold old property and LTCG is X which is invested in new house but that is sold within 3 years due to financial problems for rs Y(agreement value+ stamp duty + reg charges not including club house , maintainence, develop chgs, service tax)
    In such case I understand that I am liable to pay STCG . Issue is how do I calculate
    Is it Y -X or or Y-Z where Z is new sale agreement value

    Secondly Can I reduce above mentioned charges which are charged by builder from Y or I will have to include those and arrival at new value which will obviously inflate my tax

    • Dear Dheer,
      If Y is the Sale value of the second property then what is Z here?
      STCG = Invested value ie purchase price – Sale value (Y). Invested value is equal to LTCG (if entire LTCG has been used to acquire the property).
      Yes, you can deduct expenses related to transfer/sale (ex- Brokerage, stamp duty,registration fee, legal expenses etc.,).

  • I am not clear under para
    Important points on Capital Gains Tax & Sale of Land / Home
    If you use the capital gain amount to clear loans then tax on LTCG cannot be saved. No exemptions can be claimed.

    Can’t one clear the home loan that has sanctioned against purchase a new residential property/Flat.

  • Can I be charged for long term capital gain tax after purchase of agricultural land from the amount received after the sale of residential property (House).

  • Hi,
    So I purchased a property in Bangalore 1987 it was a barren land around 48,000₹ 60×30. it was in a joint name of my wife and myself. On that barren land we build a house in 1990 a ground floor and then a first floor with terrace 1992. At that time there was no BDI, and currently I do not know that value of the house. So I have 2 questions how do I figure out the current value of the house to know what’s my capital gains if I plan to sell ?? As we required no paper work from contractors to construct back then.

    Secondly this is my second house so I guess I will be liable to pay tax. But for my wife that’s her primary property, so does she have to pay tax on her share of capital gains?
    Note: the house occupies 1000sq.ft area of the total land of 1200sqft

    • Dear Rosh,
      As it is a jointly held property, the income & tax claims have to be shared as per the ownership share.
      Cost inflation index is published by income tax considering 1982 as base year.
      Capital Gain = Selling price- indexed purchase price.

      Kindly consult a CA and he/she will surely help you in this regard.

  • Dear sir My grand father took property in 1960 which contained three houses and some coconut trees and my mother;s brothers are selling it to builder. They are getting one apartment each worth a crore and my mother and her two sisters are getting 35 lacs each from builder for signing the sale deed. Bulder has deducted some tds and giving relevant documents for the same

    Please let me know how much my mother has to pay as capital gain tax. can we invest the money in capital gain bonds like rec and nhai bonds and save the tax

    Regards

    • Dear prashanth,
      Yes, you can invest in the Capital Gain Bonds u/s 54EC and save taxes on LTCG (if any).
      These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property.
      You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).
      You can invest a maximum of Rs 50 lakh during a financial year.

      For calculations – kindly consult a CA.

  • Hi,
    I Bought a land valued 16L in Dec 2011 and Gave it for development in 2014. We got 3 flats and we sold 2 flats for 30L in 2015. How can I show it in income tax?

  • Dear shreekath ji, i booked a flat in 2010 and paid partial amount by raising a loan.the flat registered in feb’2016. If i plan to sell it now whether i can add interest on loan as cost of acquisition. If i plan to sell it after three years i.e. After feb’2019, whether i can add interest on loan paid during the entire period of pre-construction and post costruction as cost of acquisition for the purpose of long term capital gain.

      • Sir my query and your reply going in different directions. I asked whether I can add interest on loan as cost of acquisition of flat. I have not claimed any exemption on this property as the flat is second property bought by me. The first property which self occupied, I am claiming exemptions u/s 80c as principal amt. paid and interest as loss in income from house property. The flat is residential property.

        • Dear Ravinder,
          Ideally, the Interest paid after the completion of the construction cannot be treated as cost of acquisition. Such interest could have been claimed as deduction u/s 24.
          However, there are few Court Judgments wherein the tax assessees were allowed to consider the interest payment as ‘cost of acquisition’. But you may have to fight it out and justify this in case if you receive any notice from the IT dept.

  • I sold a property and wish to invest in consructing new house,but I am a joint holder of a house. please clarify if I can get exemption

  • Dear Sreekanth,

    Thank you for this very descriptive article. It has helped me to clear all the doubts I had about the sale of my house.

  • Hi Sreekanth, my name is Padma. I am 58 years old. My father gave me a plot which was bought in 1994 for 70000/-. We have built 6 flats in it and now we are selling the whole plot for 2,60,00,000/- How much tax do I need to pay ?

    • Dear padma Ji..Suggest you to consult a CA and take advice.

      When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.
      Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
      Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.

  • Dear Sreekanth,

    my wife and i want to sell our residential plot (bought @ Rs. 6,00,000 in 2006 and selling @ Rs. 1,30,00,000) and buy a new house in other city.
    will we be liable to any capital gain as we already have a residential house which is also registered on both our names. so can we buy second house and do away with the capital gain?? for the new house, my son will also take loan of the balance amount of 70,00,000 as the new property is of 2 Cr.
    so, the new house will be registered on 3 names, my wife, my son and myself.

    • Dear sakshi ji,
      Yes there is a clause that one should not own more than one residential property…. – under section 54F.
      So, can not save exemptions on LTCG under this section.

      • Dear Sreekanth,
        Section 54F states that one should not have more that 1 residential house, other than the new asset on the date of transfer of the original asset. and what we r selling s a plot and not a house.

        • Dear Sakshi,
          As per the clause “the individual should not own more than one residential house, other than the new asset, on the date of transfer of the original asset”.
          If you are selling plot and also holding a house, then I believe you can not claim LTCG tax exemption by acquiring one more residential property.
          You may also kindly check this with a CA.

          • i hv a similar cae, i hv one self occupied house property in. my individual name, second. property is in joint name with wife as co owner is rented out… Third jointly owned house property was sold a yr back with rs. 40 lacs capital gain…. i now intend to sell one the rented property or self occupied pripety and buy bigger under construction flat of which physical possession is schedulwd in dec 2019, may i will be able to save tax on 40 lac capiral gain arisong out of already sold property n 3rd property.. Prashant

  • Dear Sir,

    I am planning sale my ancestral property for Rs.50 Lakhs and buyer has ready to give me 50% amount of that with agreement of sale and remaining he will pay after 6 months, on that money did i pay any tax? and that amount i using it for my hand loans repayment..

    • Dear Vitthal ..Yes, the taxes are applicable.
      When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.
      Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
      Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.

  • My mother had sold a property for 41 Lakhs in 2013, which was originally purchased for 6 lakhs. During sale, PAN was not quoted. The IT dept. has sent a notice asking to link the transaction to the PAN. But in the notice it is mentioned that Sale value is 67 lakhs. Have they taken value under section 50C? How shoud i respond – accept that the transaction is genuine or dispute saying that the amount mentioned is wrong?

  • Dear Sir,
    My mother in law wants to sell a house for 80 Lakhs which was acquired long before 1980 at a nominal price. Since there will be no benefit of using cost inflation index , so full tax liability seems to be there. Now she wants to distribute sale proceeds directly as GIFT between her son and married daughter(my wife) through Fixed Deposit.
    In this context, my question is that-
    a) Is my mother in law still liable to pay tax under LTCG in spite of making Gift ?
    b) Are Son and married daughter liable to pay tax on LTCG, if any?
    c) How far my mother in law can reduce her tax burden from 16 Lakhs (i.e.20% on 80lakhs)? [ if there is no decision of buying/constucting a new house] .
    Regards.

  • Sir, DDA flat allotted to my unmarried daughter in 2011. I am selling this flat in this month (Sep 16) of Rs. 41 lakh and circle rate is 37 lakh. My elder daughter also paid his half amount in starting and power attorney had been made in authority for blood relation partnership. Now loan amount to be paid Rs 7.5 lakh and remain amount to be distributed to my both daughter half for elder daughter (married) for purchasing a residential plot and half payment to be paid to unmarried daughter for marriage . get exemption of LTCG tax or not

    • Dear Hari Ji..Kindly note that one can get LTCG tax exemptions only in the above mentioned scenarios (in the article) only.
      So, only your elder daughter can claim tax exemption to the extent of her ownership share and that too if she constructs a residential house on the acquired plot within three years of the sale of FLAT.
      Do consult a CA.

  • Sir I had sold my non agriculture land for Rs 468000 and by receipts I have purchased an agricultural land with in perceived period…for Rs 315000… Whether I can claimed deduction in capital gain….. Plz suggest me

  • गाँव की मेरी पुस्तैनी खेती की जमीन,पिता जी के ना रहने पर 1980 में मेरे नाम आई,मै उसे बेच कर शहर में प्लाट वा फ्लैट लेना चाहता हू।क्या जमीन बेचने पर Capital gain tax लगेगा या नही या किसी भी प्रकार का टैक्स लगेगा।

  • Hi Sreekanth,

    I am selling my flat in this month(Sep 2016) with sale value of 38L. I booked an under construction property on Aug 2014 and got the possession on June 2016. In this case, do I need to pay LTCG tax again or it will be nill as I invested in another property.

    Need your suggestion.

    Thanks in advance.

    Pijush Sarkar

  • Dear Sreekanth,

    I purchased a property worth 36 lakhs in 2011 now I am selling the same in 2016 for 37.5. I took loan for 24 lakhs current outstanding is 16.5. Documentation was done for 26 lakhs.

    My query is what will be my capital gain.
    Someone told there is no capital gain if property is 5 year old.

    regards
    Sunil

    • Dear Sunil..Taxes on LTCG (in your case) are applicable. If the registered value is Rs 26 Lakh and if you are going to sell it for Rs 37.5 Lakh (white money) then the different amount after indexation/cost of acquisition is considered as LTCG.

  • Sir! My mother has purchased a residential house for Rs 8 lacs in 1999. Now she wants to exchange this house with an urban agriculture land having inbuilt house. So is there any tax liability?? Please suggest.

      • Dear sir, your MF taxation rule article doesn’t answer my specific question. To get a straight “yes” or “no” answer you made me to read whole article yet I didn’t get answer to my question with full affirmation.

        I hope you understand, the only reason I (and many other people like me) come to your website and ask question(s) is, We don’t want to get into long articles which talks about 100 scenarios (which are not-suitable at that point of time) and leave us with a confused answer to our actual question. If your answer to question is also like this, then I am very sorry, you are not really helping a common citizen like me. Your this noble effort is to make normal people understand about taxation effort go downside when you give long answer instead of a simple few liner confirmed response. I certainly don’t want judge you, but being your admirer, expecting you to take this feedback constructively.

        Thanks!

        • Dear Kumar,
          I take your point in right spirit.
          The reason for suggesting articles to my readers is so that they can get better view on the entire topic and I can confidently say that this method has worked/benefited to many blog readers.
          You have asked query on Equity funds’ taxation, may I know what is wrong in suggesting you to read a more comprehensive article on this topic. This article does not definitely contain 100 scenarios. Even if you go through the info-graphic you can get clarity on your query.

          Most of the times, it is highly beneficial to have knowledge on the concept than to have one-word answers.

  • Hi Sreekanth,

    Thanks for the detailed article. I have few queries regarding STCG from sale of plot in gated community :

    1. What’s the date to be considered for calculation of LTCG/STCG ? Is it date of signing Sale Agreement with Developer or the date of registration of plot ?

    2. When I originally bought the plot, I paid total P (purchase price) = BP (base price) + SD (Stamp duty) + REG (registration) + M (Maintenance for 3 years) . Now I am selling it at SP (Sale price), so is this correct :
    STCG = SP – CP ? i.e. In STCG calcuation, does cost of purchase (acquistion cost) include registration fee , stamp duty , maintenance paid by me already when I purchased the plot ?

    • Dear Ajay,
      1 – There are conflicting views on which date to be considered, I believe that date of sale agreement can be considered as the date of purchase as it gave you a right in the property.
      2 – I believe that stamp duty and registration charges can be considered but not recurring expenses like maintenance charges.

  • Dear Sir,

    We had purchased a flat in Bangalore in 2006 and sold in 2014. While calculating indexed value, how much % can be added towards Improvement Cost. Is there any limit for this and what type of proof/documents will be required for this.

    Thanks and regards

    • Dear Hebbale,
      ​​Generally, cost of acquisition of a capital asset is the cost incurred in acquiring the capital asset. It includes the purchase consideration plus any expenditure incurred exclusively for acquiring the capital asset. If it is only of capital nature, it can be treated as cost of improvement.
      For ex: Cost incurred for fencing is not allowed as CoI whereas cost incurred for building compound wall can be considered.
      I believe that there is no % as such.
      It will be difficult to prove the cost of improvement, the documents you have will help you to estimate the cost of improvement. You may get a valuation done by a qualified valuer under the Income Tax and use it for the purpose of calculating capital gains.

  • Dear Sir,

    I have purchased a house in 2010 in my name and sold the house in July/2016. Based on the sale (after indexation) got the Capital Gains of 60 L and planning to re-invest in a house for 90 L. my questions are

    1. Earlier the property which I bought and sold was in my name (only) and for the new purchase, I am planning to include my wife name in the deed (Join Ownership), If I do that, will I be eligible for the Capital Gains completely (60 L) and want to make sure, there’s no issue in adding my wife’s name to the Deed. If I do the Joint ownership will my capital gains limited to the share of ownership.

    2. For the remaining portion of the 30 L, I am planning to take Bank Loan and purchase the property, will that be any problem in doing so

    Please advice.

  • I have LTCG on a residential plot of 15 lakhs, I have bought a house in Aug-2015 (one year clause I am missing)
    If I use these entire proceeds on sale of plot for part repayment of housing loan taken towards purchase of house

    Can I get exemption of LTCG or not

  • Dear Sreekanth,

    I had purchased a flat from builder as per following details ;

    (1) Sale Deed of 7,00,000/- on 30-Sep-2014
    (2) Construction Agreement of 15,30,000/- on 22-Aug-2014
    (3) Stamp Duty 58,900/- Paid
    (4) Registration Charge 7,200/- Paid
    (5) I had taken Home Loan of 19,30,000/- on 24-Sep-2014

    Now, I want to resale the property as per following;
    (1) I have closed my home loan this Aug-2016
    (2) Sale price agreed 28,00,000/-
    (3) I want to purchase another home this same year by availing home loan of 33,00,000/-

    My Questions:
    (1) How to calculate STCG which I need to pay?
    (2) Is there any way to save STCG?
    (3) By purchasing of another home same year, I can save STCG?
    (4) What is the STCG I need to add to my IT return under “Income other Sources”?
    (5) Any suggestions, advice or points I need to take in consideration while doing this Flat Sale and Home Purchase Transactions?

    Waiting for your valuable response

    • Dear Mr Patel,
      1 – Kindly refer to the above article.
      2 – No.
      3 – No.
      4 – Short Term Capital Gains are included in your taxable income and taxed at applicable as per your income tax slab rate.
      5 – The Registrar of properties will report purchase & sale of all immovable property exceeding Rs 30 Lakh to the Income Tax authorities. So, kindly make sure you have all the documents in place.
      Read : How Income Tax Department tracks the High Value Financial Transactions?

      • Thanks for your reply

        As per above article for calculation of STCG = Total Sale Price – Cost of acquisition – expenses directly related to sale – cost of improvements.

        As per this calculation my STCG = 28,00,000-(7,00,000+15,30,000+58,900+7,200=)22,96,1000 = 5,03,900 which shall be included as “Income from Other Source” in my IT Return.

        Now My Query is;
        shall I to consider Cost of Acquisition as Purchase Price or Market Value of Property as on date of Sale (Which is 8500 per sq.mt. as per Inspector General of Registration Jantri Rate and total super build-up area of subject flat is 116 sq.mt + Common area of 34.25 sq.mt, it means = 150.25sq.mt X 8,500 = 12,77,125 + 15,30,000 (Construction Agreement) + 58,900(Stamp Duty)+7,200(Registration) = 28,73,225/-

        Now my STCG is NIL

        Waiting for your reply

  • I am planning to sell a property wherein my LTCG after indexation is 35 lacs. My transaction will be completed only by end of this year (31.12.2016) . I had bought a plot in Nov 2015 for 20 lacs.
    Q1.Can I offset this 20 lacs from the LTCG of 35 lacs.
    Q2. further if I construct a house in this plot within 2 years can I save the balance LTCG of 15 lacs.
    Q3. If I am not able to construct a house in this plot and instead buy a new house after 2 years what is the implication.

    Regards
    Navneet

  • Sreekanth,
    Thank you for the nice and detailed article.
    I’m planning to sell a flat which I bought in 2011 when the construction first started. The actual possession was given in 2015 March. If I sell the flat now, will I be eligible for LTCG? My question is mainly on which date is considered for the flats purchased under construction while deciding whether a sale qualifies for LTCG or STCG?

  • i want sell my agricultural land but the land taker is give me total payments by cheqe. so i m not clear about taxes. plz help me

  • I have a piece of residential plot which I want to sell to buy a flat. Flat cost is more than the proceeds received from sale of plot. Will LTCG apply in this case?

  • Dear Sir,

    I am planning to sell my residential Land worth of Rs 42 Lakhs after more than three yrs of purchase ( purchase cost was 5 Lakhs let us say after indexation). Thus LTCG is coming to Rs 37 Lakhs.
    I have already a flat on my name in India. Secondly My son had booked under construction flat in 2010 where in my self & my wife are also the co owner . The amount against the purchase was Loan + personal saving. Partly EMI against the loan is being paid by me also. Now the flat has been handed over in possession in Aug’2016.
    My question is :
    Whether I can use the above LTCG partly for modification & furnishing the newly possessed flat to get exemption of tax on the said LTCG proportionately of coarse ? The remaining balance of LTCG will however be invested in notified bonds ( REC / NHAI) within six months of the transfer of Asset under Section 54EC of the Income-Tax Act. If yes , then within what period from transfer that should be done in modification , furnishing etc ?

    I shall be thankful to the person replying my above question preferably on my email id

  • Dear Sreekanth, please clarify if I have sold a property for 20 lakhs in 2015 and invested full amount in Capital Gain Bonds, and am now selling another property for 40 lakhs in different FY (both are LTCG) , can I invest the full 40 lakhs in Bonds and get full tax exemtion and what options are available to avoid tax liability. Regards Sanjiv Talwar

  • Sir.
    Does cost of improvement include cost incurred in building a house? My father purchased a plot in 1980. He later built a house in 1985 and expanded it further in 1996.
    Will I be right in computing the indexed value of property as sum of indexed cost of acquisition (1980) , indexed cost of improvement (1985) and a final indexed cost of improvement (1996)?
    Kind regards,
    Prakash

  • Hi Sreekanth

    I bought a house for 66 lacs on Jun-2016 and sold my old property ( acquired in 2002) @60 lacs on Nov-16. Do i need pay any tax on this.

  • Hi Mr. Reddy,

    I have a piece of land which my parents have purchased in 1983 in Delhi. I think they bought it for 1 Lakhs. We have bother another piece of land just adjacent to this land in 1995. I think for 10 Lakhs.

    We plan to sell the land now at around 1.5 Cr.

    I just wanted to check if we can reinvest the whole amount in 2-3 properties? Or we can invest it in 1 property only and for remaining amount we need to pay the tax?

    Please suggest.

    • Dear Litty,
      Kindly note that one is allowed to purchase or construct only one new asset from the capital gain that accrues. This means that you cannot make multiple property acquisitions and thus seek to reduce your tax outgo. However, if you sell more than one property, you can invest the resulting cumulative capital gain amount in a single new property.

  • Hi Sreekanth
    I have One query :

    I have Commercial Land at Bangalore with Purchase Cost of Rs. 14.00 Lakhs in F.Y. 2003-04. Want to sale it in Current F.Y. 2016-17 at Rs. 6.00 Crore. Net LTCG is appx. 5.66 Crore. Can I Re Invest the LTCG in another Industrial Land to save LTCG Tax. Kindly Suggest & Reply.

    • Dear Dhanvant Ji..Capital Gain Tax cannot be saved if the sale proceeds are invested in a commercial property (or) agricultural land . However, one can invest the sale proceeds in Notified Bonds u/s 54EC (like NHAI / REC Bonds), even if it is a Commercial Property.
      Another option is , the sale proceeds can be invested in a Residential Property and taxes can be saved (Under section 54F).

      • Hi Sreekanth,
        In the above case, is there a limit in reinvesting in Bonds? since most bonds take a maximum of Rs 50 Lakhs only.
        In other words how do we invest LTCG of more than 50 Lakhs, in other than a residential property since I already own a house.

  • I have Commercial Land at cost of Rs. 14.00 Lakhs purchased in F.Y. 2003-04. Want to sale it in Current F.Y. at 6.00 Crore and LTCG is 5.66 Crore. Want to buy another Industrial Land for entire LTCG. to save LTCG Tax. Can I do that? If yes, Under which swction? Kindly advise me.

  • Hey Sreekanth,

    my situation is a bit complicated… we have a family home in Bombay… currently valued at 10 cr… we bought this property 32 yrs back… by my grand father.. who then gave a gift deed to my father and then from my father to me. Now i would like to sell the property… the original purchase price was 40 lacs… and today its valued at 15 cr. the house is a part of a housing society and its a row house. Kindly advice what would be my tax like ?

    • Dear Sarfraz,
      “When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.”
      Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
      Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.

      You may kindly take help of a CA in this matter.

  • Mr. Reddy, Thanks for the excellent summarization of the rules here.

    I have been owing a residential plot for the last 5 years. However, for the first 4.5 years it was jointly owned by me and my two sons. About 7 months ago, I became the sole owner of the plot, as my two sons gifted me their respective share of ownership in the property. I am now planning to sell it. Will it qualify for long term capital gain treatment even though I was a part owner for the first 2.5 years of the last 3 years of ownership? Thank you very much

  • Hi sreekanth

    First of all thanks for your patience with questions, I have a tough one, i have taken a deposit from a prospective buyer, we plan to do the property registration next financial year, when the buyer has settled his funding. Does this deposit need to be shown as my income this financial year or not, can i later club it with total sale and use for computing my capital gains?

    • Dear Rajpal .. I believe that tax implications arise only when the actual sale of property takes place. In case if the sale does not happen, then it can be shown under ‘income from other sources’ (if the amount is forfeited) .
      Yes, I believe you can club it later point of time, as it relates of transfer of capital asset, for computing CG.

  • Dear Reddy Garu,

    I have two flats. One taken possession in march 2010 and another one in July 2014. I want to sell the one It took possession in March 2010.

    Following are my queries:
    1. By selling the First flat, can I include the cost of Registration and stamp duty paid at the time of possession for indexing. Registration was done a year later.

    2. I want to buy a new flat, the cost which be more than the sale proceeds of the flat referred to above.

    In this scenario will LTCG tax be applicable. THE new flat proposed to be bought by me is in resale.

    Many thanks

    Pali

  • I’ve some investments into debt funds and equity mutual funds which I initiated 1-2 years ago (less than 3 years ago) and I would like to consider buying home/plot investment property. I understand if I redeem, I’ll have to pay the following, 1) short term capital gains tax (STCG) since it’s less than 3 yrs for debt funds – as per my income tax slab 2) and since it’s less than a year for equity funds – 15% Here my query is – If I redeem any of them in full / partial and invest in plot/home investment property, will I not be liable to pay STCG? I am looking at buying some investment property and hence I want to redeem some of my mutual funds before they complete 3 years. Please suggest if this works or the other alternate ways to avoid STCG taxation.

  • After my brother’s death, his wife ,son and daughter received 1/3rd share of proceeds of sale of a plot . each. My brother inherited it from my father, who willed the self earned plot in my brother’s name in 2001.

    My brother’s widow , without depositing the amount in CGAS account, has constructed all the proceeds in a new resedential house, with in 3 years from the sale of property. She has not filed any IT return till date. Now she has received notice from IT dept for tax liability.

    Can she claim exemption under 54F of IT act , given the fact that she has not deposited the amount in CGAS account and directly spent the money on constructing a new property. The sale of plot took place in 2013 and house was completed in 2015.

    • Dear RaviNath,
      It is not mandatory to deposit the proceeds/gains in CGAS. If she can prove/justify her stand that the proceeds have been used to construct the new house within 3 years then it should be fine. Kindly reply to the notice at the earliest. Suggest you to consult a CA and get this sorted out.

  • I have bought a flat in 2010 and now I want to sell it and buy new flat in my spouse name(she is also working) from sale proceeds of my old flat. Will there be any property tax on me?

  • I purchase a land in 2006 and registry in sep 2007. The cost of property was 6,40,000 including stamp value.
    Now in sep 2016, I am planning to sell it. According to circle rate and stamp value the cost of land is 19,44,000 but I am selling it at 18,50,000. The stamp value will be according to 19,44,000.

    I already have another Land purchased two year before and I have property loan from SBI on it. Still registry is pending to development authority issue. After register I want to construct house on this land by using the money I received from selling the Land.

    Now I want to know the Long Term capital Gain, and How can I save it.

    Please guide me.

    thanks

    • Dear Avdhesh ..You can get the construction done within 3 years. Kindly refer to Section 54F in this case. 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.

  • Is this correct? I mean can interest paid against Home loan be added to the

    Year Index Inc Cost
    Possession 2008-09 582 13,00,000
    add Paint 62,000
    add Pump/motor 10,000
    add Water tank 25,000
    add Stairs / ladder 25,000
    add HDFC Interest paid 4,80,000
    Total cost 19,02,000
    Sold 2015-16 1081 37,50,000
    Index cost (1081/582)xTotal cost 35,32,753
    Profit (sold – Index cost ) 2,17,247
    20% Tax 43,449

    • Dear Nitin,
      There are multiple divided opinion on this topic. However in some of the court judgments, it has been accepted that ‘home loan interest payments’ can be treated as ‘cost of acquisition’.
      But there is no clarity with reference to indexation of cost of acquisition on interest payments as the interest amounts are paid over a period of time.

  • Hello,
    Is there a specified format in which land development cost needs to be obtained? Would you mind sharing a sample?

  • I had bought a Flat in Bharuch, Gujarat in December 2009. My sell deed cost was Rs. 3.5 lack with builder for 965 sq.feet area & then done contract agreement of Rs. 8.3 lack for development(Construction) of it in same time(Dec.2009).
    Now I want to sell it with price of Rs. 22.00 lack then howmuch capital gain tax I have to pay?

  • I had purchased an house plot and registered in the name of my daughter when she was a minor and now she is major wants to sell the plot. Please advice me whether sale proceeds come under LTCG and rules thereon are applicable for tax exemption.

  • Hi Sir,
    I am Chinnappa P B . Selling my house in my name of 18 year old ( expecting 2 Crs) & wants to invest in a good commercial property with in 2 years where the tenants will occupy for at least 5 to 10 years. Request your inputs on the following.
    1. Can I deposit the sale proceeds amount dividing 50000 each in mine , wife & 2 sons name of bank S B a/c to save OR reduce the I T on interest.
    2. Capital Gain bank A/c scheme 1988.
    Property in my name sold & can I deposit the sale proceeds amount in 4 name of a/c to save OR reduce the I T on interest.
    3. Do you suggest getting the property Registered jointly with my wife name before sale of property to save OR reduce the I T on interest.
    4. Finally I am 54 years & left the job. The income from property is the only means of my living. My 2 sons are studying in final year graduations.
    Suggest me if any other options best for me to invest where the value of money not depreciated over next 10 years & passed on to my sons later.
    I am obliged for your valuable inputs & suggestions Thank you & warm Regards
    Chinnappa P B

  • Dear Sreekanth,
    I own two flats. I want to sale one of them. It will result in LTCG less than 50 lac. Can I invest In capital gain bond like rural electrification or national highway.
    Will my ownership of a second house be a problem.
    Thanks
    Smitha

  • My property was located in a panchayat area. This panchayat has now been upgraded to a municipality. Is the property still considered to be in a rural area for purposes of LTCG tax exemption?

      • Thanks Sreekanth, the land is still agricultural. It’s just that the local government has been upgraded to a municipality.

        Rgds

        Daniel

      • It’s still agricultural land. The local government has become a municipality, that’s all.

        Thanks!

        • Dear Daniel,
          It can be considered as Urban Agricultural land.
          Definition of Rural Area as per Income Tax Act – Any area which is outside the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is considered Rural Area, if it does not fall within distance (to be measured aerially) given below;

          2kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10,000 but not more than 1 lakh.
          6kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 1 lakh but not more than 10 lakh
          8kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10 lakh.

          Kindly read : Agricultural Income & Sale of Agricultural land : Tax Treatment, Computation & Implications

  • My wife is the Joint owner of a flat along with me. In addition she has another apartment in her name. She is planning to sell a plot of land and reinvesting the capital gains in the purchase of an apartment. The rule says that she should not have more than one residential property other than the one she is buying (to LTCG tax exemption).

    Since she only has joint (partial) ownership on one of the properties, will she be considered to have two or one apartment prior to purchase of the new residential unit.

  • Dear Sreekanth,
    Very informative indeed, thanx a ton.
    My Academic Query: Say, I want to sell my flat at Nagpur bought in 2010. Can I use proceeds to buy my father’s house (self-constructed not ancestorial). Will I be eligible for LTCG tax exemption in this case ?? In more general terms, is it possible to buy the next property from relatives ??

  • Can I save LTCG tax if I procure a new residential house on irrevocable power of attorney from someone after paying that person for the house.

  • Dear Sreekanth,
    I have sold my ancestral property which is in my name and my mothers name now. If we are putting the amount received to complete our existing housing loan, do we get any tax deduction from LTCG.

    Thanks

  • Sir
    I bought a residential land with guidance value 18 Lakhs and now I sold it for 50 Lakhs after 40 months. And I don’t have any other properties in my name. And now i am planning to buy a residential house worth 45 Lakhs with only capital gains and a bank loan. Can I invest only capital gains or should I invest total proceedings to save LTCG? Am I eligible for section 54 as what I sold was residential land? How can I claim brokerages, expenses incurred on the property? Do I need to provide any proofs or should be mentioned in the sale deed?
    Last but not least. Thanks for such a wonderful article.

      • Yes Sreekanth. The property been sold for 50 Lakh as the registered sale value in July 2016. And it was bought by me for 18 Lakhs as the registered value in Feb 2013. So the total capital gains would be 32 Lakhs without indexation.

  • Sir, I purchased one house in my Service, after retirement benefits purchased 1 plot and sold after 10 years with that money, i am going to purchase one flat. Can i get tax emeption

  • SIR

    I HAVE SALE RESIDENCIAL PLOT IN MONTH OF JULY 2016, AMOUNT RECEIVED OF SALE OF LAND RS. 20,00,000 LACS. CAN I INVEST THIS AMOUNT TO URBAN AGRICULTRAL LAND OR ANY RESIDENCIAL LAND NOT CONSTRATATION. REPLY SOON

  • Dear Sreekanth,

    I have recently sold ancestral plot acquired through will (on my name) for 12 lakhs & gave half of the amount to my sister. She is govt a employee. Do I need to pay tax for the entire amount or half of it?? Please suggest some investment schemes other than buying house/plot

    Thank You !!

  • Long term capital gains are exempted if they are used to purchase another house and the new house is not sold for 3 years after taking possession. Can it be gifted by way of hiba under the Mohammedan Law without attracting capital gains tax?

  • I have a Long term capital gain of Rs.295000/- on sale of house property on 31/3/16. I want to reduce my tax liability which is now coming to Rs.59090/- . So please give me explanation that can we increase cost of improvement & transfer exp or can avail other option of bonds .

  • Hi,

    I had a question on a scenario not mentioned above. A flat is sold for Rs.1 cr and the capital gains tax applicable is Rs. 20 lakhs. The owner of the flat re-invests Rs. 20 lakhs in a property worth Rs. 50 lakhs and the remaining Rs. 30lakhs are contributed by his daughter. So the new property is a co-investment and is in the joint name of the owner and his daughter. In this case would the owner be eligible for exemption of capital gains tax?

  • Hi,
    I booked a flat in a under construction property in Sep 2010. Agreement was done in Nov 2011. The project was delayed and I got possession for fit out on 14th May 2016. I sold the property in July 16. Can I claim long term capital claim. Please advice.

  • Sir,

    I had a polot in 1988 cost of 10, 000/-, on which i have constructed a house in 2001 with the capital expenditure of 500000/- , now i have sold the plot for 4000000/- in 2015-16, at the same time i have invested the amount of 16,00,000/- in Capital saving bonds (54EC) for more than 3 years, .. what is the capital gain for me for 2016-17 assessment year and what is capital gain in after expiry of 3 years ( if iam not planning to purchase or construct any house property).

  • Dear Sir,
    i have purchased plot with joint name of my wife in F.year 2012 & at present i have sold my old house with joint name of my brother & me. i have got ltcg can i invest this capital gain in another new house property. for tax saving
    plz help me.

  • Dear Shreekant
    We 4 brothers inherited a property ( P1 ) .
    I & my wife jointly purchased a property ( P2) in 2010.
    I & my wife purchased another property ( P3 )at basic price of 25 lakh . For P3 I got the loan from banker on March 2015 & registration done on March 2016.
    In July 2016 we sold theP1 & I got 1/4 th share Out of that LTCG comes around 25 lakh.,Registration of P1 will be done in buyers name on dec 2016..
    My questions are :
    1 ) Can I invest of the LTCG of 25 lakh of P1 in P3. BECAUSE I got the payment of P1 in MY name but P3 is jointly owned ,P3 loan sanctioned on march 2015 , registration done on March 2016 ( before P1 sale ).Also I owned another property P2 in joint name .
    2 ) Is the registration of date of property is the deciding factor or the payment date . i.e If P1 will be registered on Dec 2016 then I will get the LTCG investment time for one year before & 2 year after from Dec 2016 .

    • Dear madan,
      1 – The extent of LTCG exemption would be limited to your share in the property 3.
      Also, Section 54 does not say clearly that one should not already own more than one property.
      2 – Yes, it would be counted from Dec 2016.

  • Hi: Thank you for the informative article. I have a question, though. What if I am developing a parcel of land and building residential apartments through the usage of a fund or a construction loan? How will I pay capital gains once the properties are built and sold off within 3 years, since or the land was held longer than 3 years? How can I divide the CGT taxes or proportionate it? Also, will I need to pay stamp tax upon exit or only the buyer will? The land is in my name and in my family for years.

  • Dear Sreekant,
    I sold my plot in April 2014, which was purchased in 1980, and put entire money in capital gains savings account in june 2014. I purchased my first home, and have been using the money from the account to pay for installments. Now, I have made the full payment of the flat, but 4.5 lakhs are left in my capital gain account. What should I do ?
    Do I have to pay tax for this amount ? or can I invest this money in NHAI bond ?

    • Dear Dhanush,
      Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
      If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
      Also, kindly note that interest earned on this account is taxable.

  • Hello,

    We are planning to sell our individual house which will go for a maximum of 2 cr. and invest the same in a residential property for 1.5 cr. How can we get exempted from paying capital gains tax.

  • Hello sir

    My mom sold residential land for rs.21 lakhs in 2016.it was bought in 1980’s for 10000. Please let us know what is the tax and how to save tax ? How to invest this money ? Can i talk to you reg this ? Since my parents are old , they cant buy house for 20 L now .can i buy house on their behalf. What is capital bond scheme , if we lock for 3 years , will she get back money toher account or what should be done ? Will she get interest? Need advice .kindly provide details. Want to contact you.

    • Dear Ramya,
      If she sells the property they have to pay LTCG taxes, and then can gift the net amount to you, which is tax-free in your hands.
      (Or) She can gift the property to you and you then can sell the property and buy a residential property to save taxes.
      But kindly take a decision as per your financial goals and not just to save some taxes.

  • My mom is GETTING READY to sell land that was left to her when my dad passed away ,he paid $8.000.00 for it . It is waterfront property on a lake now valued at 400.000.00 she has had it for 50 years .We were told we could not get on it cause there was not a right away ,now found out that was not true.she only gets $500.00 a month social security. She had some cleared which cost her $10.000.00 and the person that sells it gets 10%, I know she can claim taxes on it ,but it was lised as farm land so that’s not much .she is now 80 years old.please give us advice they can help us with capital gain. Her health is had ,she needs to keep all she can for health issues.buyer coming next week to buy, she is very worried about how much she will have to pay.

  • Dear Sreekanth

    I had sold a plot in Dec 2014 for Rs 28,00,000/- put whole amount in the SBI capital gain A/c.

    Bought a flat worth 42,00,000/- in April’16 and used the whole of the capital gain amount.

    I know that I am not liable to pay income tax.

    Please suggest how do I notify to Income Tax Deppt that I have re-invested the whole amount. Whether I will do that or SBI will do that.

    Regards
    Ram Pratap Verma

  • Sir,

    I would like to know on which price the LTCG will be calculated in case actual sale price is less than the Ready recnor price, though while making the ssale of flat stamp duty has been paid on ready recnor price.. kinly reply.

  • I had purchased a 60 x 40 plot in 2001. In 2015 , it was sold as 2 ( 30x 40 ) sites to different buyers. The sale proceeds were invested in 2 different properties( both plots again). In this one property is solely on my name. The other one is under joint ownership of me and my brother and sister(done with intention of taking loan on my sisters name)..but the sale deed does not contain any details of how much each one’s share is. Please also note that the entire amount was invested by me alone for both properties . I would like to know if I can claim that the entire amount was invested by me for tax purposes and claim applicable Capital gains tax exemption.
    Also how can i get the sale deed rectified with the mention of shares of each person.

    Thanks

    • Dear Vincent,
      As the property has other co-owners, I believe that capital gain exemption will be limited to the share of your ownership. If the ratio is not mentioned then it can be 1/3rd.

  • I purchased a Plot in 1988-98 with Rs 25000.constructed a house in the year 1991-92 with Rs 1,59,072-00. Municipal water in 2005-06 with Rs 63,300-00. wood work, deepening of bore well in 2000-2001 with Rs 1,60,500-00 and brokerage charges paid Rs 55000-00.Now I planned a plot for Rs 11,66,800-00 which includes Rs 22,000-00 brokerage charges. The same property sold for Rs 30,00,000-00 in March 2016. If the capital gains are inadequate to buy or construct what I have to do? If the proposed purchase property is within the long capital gains and savings are within a lakh then what I have to further? please give me guidance.

      • Dear Mr Srikanth,

        My query is–I invested to buy, construction, wood work and sump for municipal water etc in different years from 1988 to 2015 by investing an amount of Rs 4, 37,500-00. If you consider cost index that amount comes to Rs 17, 00, 000-00. I sold that property in March 2016 for Rs 30,00, 000-00. The total capital gains arose around Rs 14,00,000-00. Now I would like to investing the same for construction of a new house after purchasing a 600 Sq yards residential plot by spending an amount of Rs 14,50,000-00 which includes registration charges and brokerage amount of Rs 22,000-00. I don’t have money(capital gains) for construction of a house. Some one who is working under CA said that the same thing is adequate & need not construct a house as per IT rules. Is it true? If so, please kindly comment on that & communicate reference of rule.
        With Kind regards,
        Sastry.

        • Dear MR SASTRY,
          If you have sold house and would like to save taxes on LTCG, then you can invest in plot and then have to construct new house within three years of the sale of the property.

  • Sir, my son intends to purchase a part of commercial property ( Hotel) being built by DAMAC ,a famous developer of UAE Dubai. under Liberalised Remittance Scheme. Funds worth 85 Lakhs are available with both of us. Any other requirement or suggestion. Thanks.

  • Dear Srikanth,

    I sold a residential property ( Property#1) and realized LTCG of 80 Lakh in FY 16-17. I had invested in an under construction apartment ( Property#2) in 2014 and am paying its installments. This under construction apartment ( property#2) will be ready in 2017. The installments to be paid to the builder towards property #2 after the date of sale of property#1 amounts To Rs 45 lakh.

    My query is – can I claim exemption of LTCG of property#1 by showing its use towards payment of property #2 installments. I can use 45 Lakh out of 80 Lakh LTCG towards payment of property#2 after the sale of property#1. Can I use remaining capital gain (35 Lakh) to buy 54 EC capital gain saving bonds of NHAI/REC . Does IT allow LTCG to be reinvested towards both the purchase of another residential property and 54 EC bonds. Thanks

    • Dear Pramod,
      Taxpayers could use Sections 54 and 54EC together.
      But where the long-term capital gains is earned from sale of a residential house, exemption from tax payable is available if the capital gain is reinvested in another property. At the same time, nowhere does it say that both property and bonds cannot be invested in together. Therefore, if workable, a part of the capital gains may be invested in a residential property and balance if left, may be invested in Section 54EC bonds.

  • i purchased a plot for 72000 and after 20 years i sold for 20 lks how much is cgtax

  • Dear Shreekhant,

    I purchased a flat in year 2008 , for witch i also took the bank housing lone . I was residing in that flat till 2015, I sold the flat in year 2015 .
    After adjustment of the bank balance lone amount , i got some capital gain .
    I purchased a new constructed – ready to move flat in 2015 , the value of this flat is more than previous as well as the housing lone also increased !

    I would like to know , is my income from sale of first flat will taxable , or may i can get the exemption , as investment in same financial year .

    in case if it taxable , that who i come to know the amount to be paid as tax .

  • Dear Shreekanth,

    My parents had brought in a plot some twenty years back and now are retired and want to sell the same.Plot is NA and is in my moms name. The plot was purchased at a price of some 3 odd lacs and now the rate is substantially higher and is yielding an amount of 80 lacs odd. We have also got a buyer for the same however the buyer is insisting on paying the amount for govt approved in white which works out to 35 lacs odd and rest all in cash as black . Please suggest how to deal with the situation and what should our decision of accepting the money. Please advice on the tax implications

      • Dear Sreekanth,

        Plot is residential and non agricultural (NA).

        Future investment is to invest in a flat which gives possession in three years .PLEASE ADVICE ON HOW TO TAKE THE MONEY FROMCUSTOMER

        • Dear Anvita,
          Anytime, it is better to accept WHITE MONEY as much as possible. But do note that you have to bear taxes on gains on the white money.
          If the builder of the property (which you are going to buy) accepts white money then it is well and good. (Kindly read above Section 54F)

          Kindly note that if the transaction value is more than Rs 50 Lakh then 1% TDS is applicable on the transaction. Also, any property transaction which is more than Rs 30 Lakh worth gets reported to the Income Tax dept. Your PAN should be quoted on the Sale Deed.
          Read: How income tax department tracks high value financial transactions?

  • dear sreekanth sir

    i want to sell agriculture land which is in urban area and within 2 km range from city,nw i wanted to know that if i show it as gift then it is possible or not ?
    how can i avoid capital gain ?
    plz reply

  • Dear Shrikant,

    Property #1 – Residential House.- (Brother #1 and Brother #2) jointly owned. (acquired in 2007). Still own it.

    Property #2 – Residential Plot, owned by Brother #1 . This is sold.

    Property # 3 – Residential Plot, registered jointly (Brother #1 and Brother #2). – Newly purchased after selling property 2.

    Details:
    Property # 2:

    Type of property – Residential Plot
    Purchased Date – Jul-2008
    Purchased Price=Registered Value = 1200000/- (12 Lakh)
    Registration cost = Rs 12770/-
    Owner : Brother #1

    Sold on Nov-2015
    Sold Value = Registered Value = 4900000/-

    Property # 3,
    Purchased value = Registered Value = 4900000/-
    Owner- Jointly Owned (Brother #1 & Brother #2), thought it is jointly owned brother 2 has paid all the amount.

    Can brother # 1 claim LTCG benefit in 54F as plans to construct the house within 3 years of purchase ? Please note jointly we own one house already.

    Brother#2 has not declared anything related to this transaction in returns. Can you please confirm, is there anything he need to declare ?

    • Dear Indu,
      No, ideally he can not claim as he has not contributed (Brother – 1) any amount.
      (But if he would like to claim then up to the ownership share in the property 3 , can be claimed).

      If the purchased Property’s value is more than Rs 30 lakh, then the authority registering the transaction (Sub-Registrar office) will automatically has to report the details of the transactions in its Annual Information Return (AIR) which contains the name, PAN, address, and amount of transaction of the purchaser and seller of the property.
      So, as long as you report your Sources of Income honestly and accurately, no worries. One should declare all sources of various incomes properly otherwise, it may lead to adverse consequences.
      Once you occupy property or give it on rent or claim tax deductions, the income from house (if any) then it gets reported to IT Dept.
      Excluding above scenarios, you are not required to disclose the purchase of property in ITR.

  • Hi,

    I had purchased plot with my wife name in 2011 april about rs. 8 lac and now i am sailing this about rs. 26 lac then how can i avoid the tax liability. 1 option can be invest in to purchase another property for same value or more
    Can you tell the options.

  • In India can any one sell his properties to his relatives for less than the market price to get away from the capital gains tax

    • Dear POLISETTY,
      One can sell a property at a price less than the Market price or even less than the Govt guidance value (minimum registration amount). But kindly note that the stamp duty or registration fee is applicable and calculated on the Govt guidance value and not based on the transaction value (if it is less than Guidance value).
      If the actual sale consideration is lesser than the stamp duty value, then the stamp duty value is taken as the deemed selling price and capital gain will be computed accordingly.

  • r/sir
    i am middle class PSU Employee with anuual salry Rs 650000 and i have been taxed and deducted by my employer Rs 28540 during FY 2015-2016. i got my form 16.
    sir i got my NSC of Rs 20000 matured in that FY 2015-16 and got Rs 32000 ( means 12000 as interest) . Is this interest Rs 12000 to be shown in my income during return file ?? i heard there is no tax on interest up to 10000. then how much interest to be shown in my income during return filling ( Rs 12000 or Rs 2000) . i keep my all records neat. plz suggest me.

    • Dear sanjeev,
      NSC interest amount is first included in computing income under the head other sources and then deduction of same is allowed U/s 80 C (for first 5 years) as it is deemed as reinvested except for 6 th year.
      If you have not showed the interest income in previous Assessment years then below options can be considered;
      Option 1: You show interest earned under heading Income from Other Sources, as well as Deduction on NSC under section 80c every year (as explained above).
      Option 2: You claim deduction for interest earned on NSC in the year for the deduction, but you don’t show it as it as Income. In this case, the entire interest amount will be counted as an Income in the last year.
      Option 3: You don’t claim interest earned in for the deduction and you don’t mention interest earned as Income. In this case, the entire interest amount will be counted as an Income from other sources in the last year, but only first four years will count for deduction.

  • Sir, I had purchased a flat for 3.5 lakh. in the year 2000. Now intend to sell the flat for about 18 lakhs and use the same to clear my loan Mortgage amount of Rs 14 Lakhs. And with the remaining 6 lakhsI would like to buy a plot for house construction in future.
    Kindly advice mytax liability as iam a serviceman.

    • Dear Ravindra,
      You have to pay LTCG taxes on the portion of Rs 14 Lakh.
      You can use the remaining portion Rs 6 Lakh to buy a plot but – ‘If you plan to use the gain to build a house, it has to be done within three years of the sale of the property. Do note that ‘cost of land’ can be included in the construction cost.’ (Section 54).

  • Dear Sreekanth,
    My FATHER-IN-LAW is selling his house for 36.5 Lakhs. The govt. value of the land is 20 Lakhs. The house is owned by him for more than 20 yrs and he inherited it from his father. I am planning to purchase a flat worth 40-45 Lakhs excluding registration charges within 5 months. Approx 30 lakhs from my father-in-law’s money will be invested in the flat I am purchasing. I will be taking 20 Lakhs home lone from bank and my wife (a home maker) will be co-applicant. The total amount will be invested in purchasing, interiors etc. Please suggest how to get tax exemption. SHOULD I ALSO MAKE MY FATHER IN LAW AS CO-APPLICANT? The house is still in his name and not in my wife’s name. I can understand, if he gifts me the money, he (a pensioner) will be taxed. I have read your article “Got a Gift? Find out, if it is Taxable or Tax-free?”. Still I am confused. Should my Father in law gift the amount to me or my wife? Whether he will be taxed? Whether I will be taxed? Kindly guide me.

    • Dear Biplab,
      If he sells the property without gifting, he has to pay taxes on LTCG.
      If he gifts the property to your spouse, and she sells the property, she have to pay taxes on the LTCG.
      If he gifts the property to you, you sell the property then you have to pay the LTCG. In case if he gifts the property and you do not sell it, any income derived from it (old property) will be clubbed to your father in law’s income.
      To save taxes on LTCG: The LTCG can be claimed as exempt from tax by reinvesting it in one new residential property situated in India (which you are planning to do).

      • Dear Sreekanth,

        Thanks a lot for your guidance. Please help me further with a small clarification. As I am going to apply for home loan, I have to be the applicant & hence the property will be registered in my name. In case to claim LTCG exempt form tax, my father-in-law should be the owner of the new property. Hence the following choices;
        1. Will bank grant me home loan if my father-in-law will be the sole owner?
        2. If no, can I make my father-in-law as co-applicant & in this case will bank give me loan?
        3. If yes from bank, as he becomes co-applicant, can now the LTCG tax exempt be claimed by my father-in-law?
        4. I hope bank will allocate me loan, if he is co-applicant.

        Please do guide. Thanks a lot in advance.

        • Dear Biplab,
          1 – Chances are low. Your banker will insist on your father in law to be borrower or co-borrower. (assuming that you are saying the your FIL is sole owner of new property)
          2 – Yes, depending on the eligibility rules (income).
          3 – Yes, limited to his share in the new property.
          4 – Yes.

  • I got 1 Acre Non Agricultural land property from my mother 10 years back. This property was given to my mother by her father i.e my grand father about 50 years back. Now I am the sole owner of this property. Now I wanted to sell this property to meet some urgent requirement.

    Kindly advise me what are the tax implications in this deal. Am I lible for any tax payment.

    • Dear Jyoti,
      LTCG is applicable in this case.
      Sale of a property that is inherited or accepted as a gift will also attract capital gain/loss provisions even though you haven’t spent any money to acquire it. In such a case, capital gains will be computed on the basis of the cost to the previous owner, indexed to the year of purchase.
      Suggest you to take help of a CA.

  • If i am using Short term capital gain amount in purchasing a new property then do i need to pay taxes for short term capital gain

  • Dear Shreekantji
    I have bought one plot in the year 2000 for Rs. 1,00,000/-on co-operative basis . Now construction of Flat is going on which cost Rs. 20,00,000/- and same will be completed very soon. And I will buy another residential Flat shortly Can I get exemption ofLong term capital gain tax , if I sell my flat immediately. . If so, which year (2000/2014) will be considered for calculation of EXEMPTION OF LONG TERM CAPITAL GAIN TAX ? Pls reply. Thanks.

  • This is regarding capital gain calculation on a NA plot.

    I booked a NA plot in 2010 – july by paying 15% amount ie 2 lakhs. further 6 lakhs were paid in 2013 and the agreement and sale deed was done in 2014. by paying all balance amount .
    The Agreement /sale deed has all detials of payment made with dates . If in future i get a good price and decide to sell which date will be applicable for Capital gain calculation 2010 or 2014.

    Regards

    • Dear murali,
      What is NA plot?
      The opinions are divided on this topic.
      But I believe that booking gives an ownership interest, so you can consider 2010 for CG calculations. You may also check with a CA .

  • Hello,

    I sold an ancestral property in Jan 2016 and invested the entire amount in eligible bond after March 2016. My questions are:
    1) Since i invested after the end of FY, will I be liable to pay tax on the capital gain
    2) How will I calculate capital gain tax amount as for me the purchase price was nil.
    3) How will I show the bank balance if that property was not reflecting at zero cost on my balance sheet.

    Thanks,
    Barun

    • Dear Barun,
      1 – The investment in bonds can be made within 6 months from the date of sale of asset (which is true in your case). So, no issues.
      2 – When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.
      Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
      Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.

  • SIR
    My mother purchased 2 plots of each 104 sq yards worth Rs 4,40000 and sold in 2016 in Rs 990000 ( each 495000). she has no other income. she have to pay tax or not please tell. Is there any provision for tax exemption on property below 10 lakhs .

    ashok kumar

    • Dear Ashok,
      Is it STCG or LTCG?
      Long Term Capital Gains are taxed at 20%.
      Short Term Capital Gains are included to taxable income and taxed at applicable income tax slab rate.

      • sir thanks for reply. i forgot to tell the year of puchase. it was purchased in 2010 means it is LTCG but my question is that amount is very low. kindly calculate tax and tell wheather it is taxable or not. she has no other income .

  • What is the maximum limit of repairs to building can be claimed under capital gains under long term capital gains taxation.

  • Notification to acquire under compulsory acquisition was notified in may 2008 can indexed cost be claimed for long term capital gain till the year of receipt of compensation in 2012-13

  • MY CLIENT HAS FLAT ON WHICH HE HAD TOOK LOAN AFTER PURCHASE. PAID INTEREST& EMI.ON SALE OF FLAT WHAT IS TREATMENT OF INTEREST PAID . IS IT COST OF IMPROVEMENT TO FLAT OR NOT

  • Hi,
    I have sold one of my plot (purchase in year 2000, sold in 2012) in 2012 with indexed capital gain around 28lacs in 2012. I have invested that money in under construction flat in gurgaon in same month of 2012. Unfortunately till today construction not completed for that flat, and even I am going to apply for a refund of my money as builder will not build that flat for sure. Also I have bought another Ready to move flat with 35lacs loan in Jan2016 and I am still paying EMI for that loan. So please suggest for the following.
    (1) As per 54f, construction of new house must completed with in 3 years from sale date. I have sold in 2012, but construction not completed till today (2016). So what is the impact and how to tackle this situation.
    (2) Suppose I get refund from builder. Then can I use it to re-pay my home loan of my flat purchased in Jan2016 to avoid Capital gain tax?
    (3) As this is builder fault as he has not constructed the flat, so any, any possibility from govt to rebate me tax on capital gain in my situation? Any middle and best way to handle this.

    Please suggest. waiting for your reply. Thanks in advance.

    • Dear guest,
      1 – There are lot of judgments given by the courts which are similar to your case. Kindly read this article : Click here..
      Based on these judgements, we can infer that – in-order to get the benefit under Section 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establish that the assessee had invested the entire net consideration within the stipulated period.
      2 – I dont think so it can be allowed, as it is beyond 3 years time-line.
      3 – Not sure.
      Also, suggest you to consult a CA.

  • Dear Sreekanth,

    I bought an apartment while it was under construction in 2005 and paid installments to the builder as per the construction schedule from 2005-09. It was completed, possession taken and sale deed registered in 2009. I sold it in 2016. Now while calculating the Long Term capital gain, should I take the index year for each installment paid (cash outflow of purchase) as the index year in which the installment was paid or should I take the possession year (2009) as the index year for each installment. The capital gain will be higher if I take index year to be possession year (or registration year) for each installment . Please advice.

    Thanks, Pramod

    • Dear Pramod,
      Allotment Letter date can be date of acquisition for Calculating Long Term Capital Gains.
      You can consider 2005 itself if you had paid booking amount and got the allotment of Flat or Agreement for sale is done.
      Kindly read this court judgment, click here..

      • Thanks Sreekanth – It is a long term capital gain whether I take allotment year 2005 or possession year 2009 since sale is done in 2016. My confusion was on how to calculate indexed purchase cost. Your reply and the judgement suggests that I should index my total purchase price (which is paid in installments from 2005-2009) by taking the index year as 2005 since in 2005 I paid 20 % booking amount and got an allotment letter and Agreement for sale.

  • Dear Srikkanth,

    My wife has purchased a vacant plot for 2.75 lacs on 2007 and which is sold on august 2016 for Rs.24.75 lacs, this amount was used in my loan account for which is due to towards my property loan to be paid in bank. kindly advice if any capital gains tax has to pay?

    • Dear rajmohan,
      Yes, she has to pay LTCG taxes.
      In your case, you can tread this amount as GIFT.
      Kindly note that rules of clubbing of income comes into picture if you gift a certain amount to your spouse, or minor children or Son’s wife. Any income earned by the recipient on the gift shall be clubbed with the income of donor (you).
      Read: Gifts & income tax implications.

  • Hi,
    I have purchased one bhk dda flat in 2012 for 7lac and took a loan of 9 lac against it. Then in 2015 i sold it for 13 lac. Please help me in knowing how much time i need to invest in capital gain bond for saving my tax.
    Also, can i invest it right now in the month of July 2016 for saving tax for the year 2015-2016.

    Please help.

  • Hi Sir,

    Example:
    We have bought property in Jan/2014 for 10 L s and stamp duty and registration charges around 50K. Now we have sold the same property in June/2016 for 11L. In this case is it STCG or LTCG? and what about the stamp duty charges?

    In which assessment year we need to file the returns 2016-17 or 2017-18?

      • Hi Sir, Thanks for suggestion. Waht about stamp and registartion charges? I have to deduct from gains while filing returns? Thanks .

        • Dear Guest,
          Any expenses related to the transaction like brokerage, stamp duty, registration fee etc can be included in the cost of acquisition and can be deducted.

  • Hi Sreekanth,

    I got a capital gain of 21 lakhs by selling my house.
    I invested 12 lakhs to buy a new residential house and took 10 lakhs home loan.
    So price of new house is 22 lakhs.

    Now can I claim deduction for 22 lakhs (i.e including loan amount) or only for 12 lakhs?

  • I am buying a property & the seller tells me that he will pay registration & stamp duty charges at the time of registry & I give him cash. This way he will gain benefit in capital gain tax.

    Is it suggested for me as an buyer : Does it add any benefit to me ?

    • Dear Vikas..If you bear the expenses then you can claim them under section 80c.
      But the possession of the property & expenses have to happen in the same fiscal year. (and certain other conditions are applicable).

  • I have sold a house property in May 2016 owned by my father in year 1956 and transferred to my name in year 2006 in a division of property deed duly registered in Court before his death.Now I have sold this property for a value of Rs45.00 lacs.What would be my tax paying liability?In case I prefer to buy Long Term Tax saving Bonds,What amount shall have to be deposited in Bonds?

    • Dear Vinod,
      You are allowed a period of 6 months to invest in bonds u/s 54EC. You can invest a maximum of Rs 50 lakh (capital gains and not entire sale proceeds) during a financial year. Kindly consult a CA to get the LTCG calculations on this transaction.

      • Dear Sreekanth,
        The CA was contacted .He has asked me to get valuation of property done on 1-4-1986 since it is alloted to my father in Year 1956.On the contrary another CA says that the valuation of property is to be got done on Year 2004,the day it was divided by father under family settlement.Kindly advise which CA is correct.

  • Dear sreekanth,
    I got RS. 9.35 lakhs from selling of ancestral house in March 2016, I m already having my own house a flat,now I want to sell my flat and build a single house for my family .will i be able yo get tax exemptions and what little advice u can give to me.plz reply

    • Dear Abhishek..I believe you can consider Section 54 in this case.
      The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under construction property or flat , the construction has to be completed within three years of the transfer of the first property.)

      • Thanx.that means I have two properties one was sold and other is about to sold.so I can buy or built a new one in two years.but the plot in which I will make a house was purchased long time back.and it’s lay out not approved

        • Dear Abhishek,
          Do note that ‘cost of land’ can be included in the construction cost (Section 54) . But I am not very sure if the time-line applies to purchase of plot or not. Kindly check with a CA.
          If you get a convincing answer, kindly do share it here, will be useful to other blog readers.

  • Dear Sreekant, I purchased in August 2015 a residence flat for 194 lacs I had two residential flats which I sold in Sept 2015 and May 2016. Te total LTCG of both the flats is cummulatively less than the 194 Lacs cost of purchased property. Can I claim exemption of LTCG Tax by combining the LTCG of both the flats sold and utilising the entire LTCG for one house purchased.

    Regards

    Meher Gandhi

  • Respected Sir,

    Please intimate the amount of LTCG tax in the following case:

    1. Sale of residential plot: Rs 30 lakh
    2. Cost of acquisition with indexation: Rs. 573000
    3. Balance: Rs 24,27000
    4. Purchase of residential house within 2 years: Rs 22 lakh.

    Query: whether the taxable amount will be Rs. 8 Lakh or Rs 2.27 Lakh in the above case?

    With regards,
    Varun

    • Dear VARUN,
      Capital gains will be exempted to the extent of it is invested in the purchase and/or construction on new house ;
      1 – if the entire amount (sale proceeds) is equal to or less than the cost of new house then the entire capital gains will be exempted.
      2 – If the Capital Gains amount is greater than the cost of the new house then the cost of the new house will be allowed as an exemption in this case it is Rs 22 Lakh.
      So the remaining gains of Rs 2.27 will be taxed.

  • I bought 1/2 acre land in 2006 and sold a portion of it in 2015 & 2016 (sold 2 sub divided plots) & bought (a) vacant plot in May 2015 (out of entire proceeds of 1st plot sale – and will build my independent house on it next year; I have 3 yrs time) + (b) an under construction flat last week, out of entire proceeds from 2nd plot sale 1 month ago. Since I have 3 years to build my house, I will construct it next year itself after selling my only other house that I own so far / built in 1999 – next month.

    Two questions – #1: Since I will own one flat at the time of selling this old 1999 house next month (to build my new house next year on vacant plot I bought in May 2015), can I avail of section 54F for the 2 sub divided plots sold in 2015 & 2016 & section 54 for selling my old 1999 house next month – all 3 properties (2 vacant plots & a house) combined to buy (b) a under construction flat (last week) and (a) vacant plot (last year), with a new house to be constructed next year on it ? #2 : I understand that I cannot own more than 1 house at the time of buying or constructing the new house – excluding the house I intend to sell next month – right ? I also understand that any excess amount (not used to construct this new house next year), will be subject to LTCG tax after deducting inflation adjusted cost basis of my old 1999 house.

  • Dear Sir,

    In order to avail LTCG tax exemption U/s 54 F
    “The new property must only be bought on the name of the seller and not on anybody else’s name. Joint ownership can be acceptable but exemption can be limited to the share of ownership.”
    In this connection please intimate Section/Rule/Order under which joint ownership can be acceptable.

    With best regards.
    Ramesh Kumar Arora

  • Hi Sreekanth,

    I had purchased flat in Dec 2010 for 1010000 & sold in April2016 for 2560000. After calculating indexation cost the LTCG 962000.

    Under section 54 whether below options are legal….

    1.Whether I can use the LTCG to buy a new plot which is costing 17lakh, more than the LTCG?

    2.or whether I can use the LTCG to construct a house within 3 years for the plot which I bought 4 years back in hometown?

    Note:In 2013 I have bought a new flat from my savings. Whether this gives any problem for the above options…..pls guide

    Thanks in advance

  • Sir, I reside in Lucknow. I had purchased a house in August 2003 for Rs. 550000/- with home loan of Rs. 520000/-d . I spent around one lac on its repairing. I also availed tax benefit on home loan. I never gave it on rent because of fear of KABZA by tenant.

    Now I want to sell it around Rs.40 lacs as per DM circle rate in year August 2016. Proceeds will be utilised in purchasing a plot in December, 2016 at a cost of Rs. 30 Lacs. Further, I intend to build a house on that (which will be purchased in December, 2016) Plot in Year 2017 estimated cost of which is Rs. 20 Lacs.

    I also thinks it worth indicating that I have been owning a EWS (economically weaker section) house in Lucknow since 1987 and residing therein since then.
    Sir, my query is whether I shall be liable to pay any Capital Gain Tax. If yes, whether there is any way to avoid that.

    Thanking you,

    Yours,

    Shivali Srivastava

    • Dear Shivali,
      You can buy a vacant plot by using the Long Term capital gains from sale of house and also build a house (within 3 years).
      You can claim LTCG tax exemption under section 54.

  • Dear Sreekanth

    My father (age 62, pensioner) is selling a piece of land for Rs. 22 lakh in 2016 which was bought for Rs. 10 lakh in the year 2011. We are planning to buy a flat. I am a salaried individual and can get home loan up to Rs. 20 lakh. My questions are

    1. Can we jointly buy a flat (currently under construction and cost at 42 lakh) with the money earned from selling the land (under section 54F) and rest Rs. 20 lakh by taking Home loan under my name.

    2. What would be taxation if I buy the home individually with home loan of Rs. 20 lakh and show Rs 22 lakh as gift from father. In this case, who would be liable to tax, me, father, or both?

    Thank you in advance.

    • Dear Gokul,
      1 – You can buy. But kindly note that the extent of LTCG exemption is limited to the share of ownership (father’s) in new property.
      2 – Gift is treated as Tax exempted in your hands. However, your father has to pay LTCG taxes (if any & if gifting after the sale of land).
      Read: Gifts & income tax implications.

      • So, I’m booking it next week with home loan of Rs 2o lakh and rest with my father’s money. We’ll share the ownership.

        Is that okay.

        Thanks Sreekanth

  • Dear Sreekanthji, I have purchased a flat in June 2002 for 4 lacs and sold it in June 2016 for 25 lacs. What will be the Long Term Capital Gain? To purchase this flat, I have availed the Housing Loan of Rs.3.20 lacs also. Now, I am going to purchase new flat @49 lacs in next month. I will utilised the sale proceeds in new flat. Please guide.

  • Dear Sreekanth,

    I purchased under construction flat in Sep,2015 by taking loan from bank in my name. My dad intends to sell a residential plot which is in his name (Land was purchased 20 years back). May i know the provisions of Section 54 of IT Act, whether my father can transfer the proceeds received from the sale of residential plot to me as gift to clear my loan and can he get exemption from LTCG by transferring the proceeds to me as the land being disposed is in my fathers name and the flat being purchased is in my name. Awaiting for your reply. Thanks a lot in advance

  • I bought a residential flat and 2003 and sold it 2015 and I got a capital gain of around Rs5Lakhs. Can i get tax exemption on capital gain if I purchase an Agricultural Land in Rural Area worth more than 5Lakhs?

  • Dear Srikanth,
    My wife has intended to sell some landed property. Can she use the LTCG amount to settle the LIC housing loans outstanding as on date for the flats she purchased along with my daughter in 2009. The second question is how can she transfer my daughter’s share of the sale proceeds to USA.

  • Dear Sir,
    I am a government servant and I purchased a small old house 13 years back through housing loan. Now the loan is closed and purchase capacity also increased. If I purchased a new house with sale of old one along with home loan what is the implication for saving IT. Is it beneficial to me or can I invest the surplus money some where lese with out purchase. What is your suggestion.
    Thanks

  • 1. I have purchased plot 4000 sq.feet costing 86 lacs in may 2015. I wanted to construct a building on it which will have 8 units.
    2. For the construction I have sold my 2 flats in Aug 2015 . I got the capital gain of 50 lacs on it. As I have 3 years to complete the building so i can claim my capital again. but my CA said I can only claim one floor which will have cost of 50 lacs.

    but main issue comes now

    1. my father also sold his land for 24 lacs but the value as per government land is 90 lacs as stamp study paid on 90 lacs . As that land is under BDP reservation so he could not sale for that price so he sold for 24 lacs only. but CA said he has to pay tax on 85 lacs as that’s his capital gain.

    2. now I want to sale my 1000 sq.feet land to my father as I don’t have enough funds to make building.

    3. if my father buy my land for 24 lacs and put remaining amount which is 61 lacs in his capital gain account so he will also get 3 years to make his house on it. but as I m going to make building so can we put building plan together and he can spend his 61 lacs in capital gain account to make his part in that building.

    can he claim that as his capital gain?

    or he his to make house only on his land ?

  • Dear sir,
    After selling a residential property (flat) can I invest LTCG in buying other residential plot ( only plot not build up and even no plan to built anything in near future)?
    Please solve My query

    • Dear Satish,
      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 buy a Plot but with the CG but you have to get the construction done within three years of sale of the property.

  • Dear Srikanth,

    Can I invest my capital gain partly in bond and partly in extending construction of my present residence( constructing first floor). Please revert.

    regards
    P M Shanmugam

  • Dear Sir,
    Can i Purchase a Flat against Sale of Land of Same amount, and for this reason any tax involvement in this procedure
    please reply me.

  • very clearly narrated and intelligently highlighted.The condition of owning not more than one house for claiming LTCG is applicable under sec 54F only and this sec is applicable for sale of land,not house property.I hope i have interpreted correctly.//For claiming exemption u/s 54EC bonds are generally not available;are other than REC andNHAI bonds also eligible?Is there time limit to spend capital gains a/c or one can keep extending till one gets house of his liking(sec 54 only).

    • question is….

      suppose maine aaj ek property kharidi 55 lakhs ki or 3 mahine baad use kisi ko sell krne k lie sales agreement sign krdia 60 lakhs me. or vo hume payment installment me karega in every 6months after deducting TDS u/s 194 IA . to hum apni books me sale kab record karenge?? at the time of signing sale deed ya at the time of receiving installments ya jab hmne poori payment receive krke use property transfer kari (jab registration hogi).

    • Dear Mr Singh,
      If you do not utilize the amount in CG A/c within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.

  • Dear Sit

    I have ancestral agriculture land which comes into jurisdiction area. I have converted into residential plot. I want to know how can be prepare the Profit & Loss Account because I an not aware what will be the purchase cost

  • I have sold a residential plot and i want to purchase another plot Can I get the exemption

  • Hi Srikanth,

    I had a purchased a flat in HYD in 2010 Dec for 22lakh. But in sale deed the cost is 9.25 lak. At the time of registration the builder said that we can save tax by showing less amount in sale deed. Now last month I have sold my flat for 25.6 lakh & the buyer doesn’t wanted to lower the price in sale deed & he registered the flat at 25.6 lakh.

    Actally I have not got any capital apprecition.

    Now I have 2 questions…
    1. Whether the LTCG will caluated for 25.6-9.25 (- the indexation cost)? or it will be for 25.6 – 22 lakh(actual paid mount)
    2. In the above article you have mentioned with LTCG we can build a house in span of 3 years. Pls can you give more details on this like whether we have any clauses? becasue in 2013 I bought my second apartment where I’m staying at presant

    pls revert back…thanks in advance

    Reagrds,
    BRN

    • Dear BRN,
      1 – It will be Rs 25.6 Lakh-Rs 9.25 Lakh
      2 – Its 3 year forward and 1 year backward, in your case you have bought the property in 2013, hence may not be able to consider that clause..

      • Hi Sreekanth,

        Thanks for the reply.

        The second answer was not clear to me. You mean whether I can build a house from the LTCG even Though I bought a flat before selling my 1st flat?

  • Hi Sreekanth,

    I booked a property (property A) in 2014 and registration will be done in 2018. I am paying the installments (no loan) since 2014.
    I sold my another property (property B) in 2016 which I purchased in 2009.

    Can I use the capital gains of property B to pay further installments of property A and save tax as per capital gains rule?

  • As per CBDT notification in April 2014,agreement date is the date of acquisition of the asset (not sale deed registration date) and capital gain is decided based on this date.Please check and clarify.

    • Dear Jojo,
      I agree that different professionals have different views regarding the date to be considered and there is still confusion. I believe that ‘date of agreement’ holds good in-case of an under-construction flat where the flat registration has not been done but the flat has been allotted. Also, ‘date of possession’ is also very important.
      Kindly share the CBDT notification link/source. Thank you!

  • Dear Sreekant
    I am sorry. I will repeat my query in simpler way as below
    1. While under construction purchase agreement made by paying for registration and stamp duty paid in 2011 Jan and commenced paying my instalments (no bank loan)

    2. Construction got over, and paid my final installment n got possession in Jan 2013

    3. Sold the house Apr 2015

    Want to know if STCG is to be paid?

    Regards n thanks
    Srinivasan

    • Dear Srinivasan..Kindly just tell when did you Register the house (sale deed – year of registration).
      Scenario 1 : 2011- If you have paid full amount in 2011 then LTCG.
      Scenario 2 : 2013 – If you have paid final installment in 2013, registration done in 2013 and got possession in 2013, then STCG.

      • Dear Sreekant,
        Sale deed year of registration Jan 2011.
        At that time full amount NOT paid. In instalment I paid over period of 2 years. Final installment paid in Dec 2012.

        Possession letter was given to me in Mar 2013.

        Sold the house in March 2015

        Is STCG applicable?

  • Dear Sreekant, I am sorry my query was not clear to you. I will repeat :
    Bought house under construction in Jan 2011 by making agreement deed betwewn builder n me.
    From then started paying the cost in installment till completion.
    Got possession in Jan 2013.
    Sold house in April 2015. . Will ii have to pay STCG tax. From agreement date I have completed 4 years, whereas from occupation date I have completed only 2 years. Hope my query is clear now. Sorry for inconvenience.
    Regards Srinivasan

  • Dear Sreekant, I thank you for your valuable advices and prompt reply.
    I have one more query. I bought a house while under construction, by entering into registration agreement between me and builder in Jan 2011, whereas construction got completed and allotted in Jan 2013. I sold the same in Apr 2015, assuming I have completed over 4 years from 2011. Was my assumption a big mistake.
    Regards and thanks

    • This is Srinivasan referring to my earlier comment of date . A small correction to this. The house was completed and occupation given to me in Jan 2013 (I mentioned the word allotted, instead of mentioning gave me possession to occupy)

  • Hi Sreekanth,

    Thank you for your valuable time on answering each and every queries.

    I have couple of question on Capital gain investment part.

    I am an NRI and have executed sales deed (April 2016) with buyer for a Residential unit after long term capital gain. Capital gain computed was Around Rs 18 Lakh in May 2016.

    Now i will be filing return in July 2016 and before that i need to invest my CG in property rather than depositing in capital gain account.

    1. I have invested in under-construction row house in Surat for Rs. 18 lakh (same as Capital gain computed) by issuing cheque of complete amount under individual name (who is owner of the develpoment).
    2. We will be signing MOU (not registered) for submitting to IT to show the CG has been invested.

    My question.
    1. I plan to invest in another residential property somewhere around Dec 2017 (less than 2 years of the original sell). With out selling the first purchase.
    2. Do we have to register the first property or the MoU will be a legal document?
    3. In case in sell the first property after 2 year at around Rs 20 Lakh, will that make any issue with IT?
    4. Any other document need to be furbished other than MoU for the first property during filing returns?

    Will appreciate your reply on this.

    Regards,
    Yatin Kadam

    • Dear Yatin,
      2 – MOU is a legal document. Are you going to pay any consideration for this? Are you going to get any allotment document?
      3 – If the new house is sold within three years, the deduction claimed will become taxable as a long-term gain in that Financial Year.
      4 – There is no need to submit/enclose documents when filing returns. Kindly take help of a CA to file your IT returns.

      • Thanks sreekanth for your prompt reply.

        1. MoU is not registered hope that’s OK?. I have paid cheque to the seller. What do you meant by consideration? Other than MoU do I need allotment letter?. I am planning to sell property after 3 years and only legal document I am going to carRyan is non registered MoU *(it’s within family investment )
        2.can I purchase 2nd property while the 1st is still in my possession based on MoU?
        3. How can IT knows that I had locked my CG in new property for 3 years without any submission or getting it registered.

        Would like to know one more doubt.
        I need case I cancel the MOU after 1.5 years and invest in new property. Will it make a difference.

        Thank you in advance

        Regards,
        Yatin

        • Dear Yatin,
          1 – ‘Consideration’ meaning some part-payment. It might be better to get an allotment letter and keep it with you.
          2 & 3 – Kindly note that Income tax procedures are based on Self-assessment. IT dept may issue compliance notice or ask for scrutiny in case if they find some discrepancies in ITR(s) or there are mismatches w.r.t income/expenditures.
          Kindly consult a Chartered Accountant for more information.

  • I sold a residential flat in Kolkatta and now planning to buy mini farm house in Delhi Chattarpur area. Will I get CG Tax benefits . This will ll be my first house after sale of of Kolkatta residence.

  • Sir, I have been allotted a Residential Flat ( 1BHK ) by Bengal Park Chambers Housing Development Ltd. on 17th November 2007 and it was handed over and registered under my name on 6th September 2013. The total purchase consideration paid by me was Rs. 4,30,000/- .
    Now i want to sell the flat at Rs. 16,00,000/-. The Stamp duty value of the flat is Rs. 28,78,000/-.

    My queries :

    1) How to calculate the Shart Term / Long Term Capital Gain
    2) How to save tax on such sale
    3) What will be the best option if I am ready to hold it for next 5-6 months and not willing to invest the money in any Tax free bonds.

    • Dear KUMAR,
      1 & 2 – Kindly go through the article.
      3 – You can deposit the capital gains (if any) in Capital Gains Account Scheme offered by any public sector bank. The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

  • I’ve sold one flat in Mar’16. The flat was allotted to me in Dec 2007 and I’ve been paying regular installments for the same. The possession was given to me on 6th July 2015 when the sale agreement was executed between me and the builder. Is the resultant Capital gains Long term?
    If yes, then should the total cost paid for acquisition be indexed for computation of capital gains?

    • Dear Ajay,
      Date of Agreement is only to be considered in case of under-construction flats where the Flat Registration is not done but the flat has been allotted.
      In cases where the Flat Registration is done, the date of Registration would be considered. In your case, as your registration has been done – the date of registration would be considered. So, in this case it may lead to Short Term Capital Gains

  • Mr. Sreekanth Reddy,
    I have sold an ancestral property in 7thAug-2013, at Bangalore. In order to avail LTCH 54F I have booked a Flat at Bangalore which is under construction. My Auditor is insisting to get it Registered before 7th Aug 2016 to avoid CG Tax
    (before three years of sale transaction). Now the builder has postponed for next year to complete the project. He is prepared to get the flat registered as is where is condition without OC. He wants the entire amount including sales tax @5.8% and [email protected]% to be paid upfront and get the property registered inspite of lot of work to be completed by 50%.
    Under such circumstance (1) Can I postpone registration for next year, still can I avail 54F exemption.
    (2) Should I pay ST & Vat at the same rate in advance at the time of registeration.
    (3) Is registration allowed before the construction completed. (4) Is OC required to avail 54F.
    Awaiting for any early reply.
    Thanking you
    PREM KISHORE L

    • Dear KISHORE,
      1 – Three year clause is applicable.
      2 – Tricky situation. Both ways, risk is involved.
      “The Central Board of Direct Taxes (CBDT) has also clarified that to qualify as an investment for construction under section 54F the crucial date is the date of allotment of flat by an institution and payment of installments was only a follow-up action and taking possession of the flat is only a formality.”

      You may read few court judgments in this regard which provides that exemption can be claimed even if construction is not completed within 3 years.

      Article – 1
      Article – 2
      Article – 3

  • Dear Sreekanth,

    I intend to sell my 1BHK flat for Rs. 40 lakhs in the current financial year 2016-17 which I bought in the financial year 1988-89.

    Kindly let me know the tax liability on the three years redemption on the invested amount in capital gain bonds (exemption under section 54EC) of REC or NHAI.

    • Dear
      1 – The lock in period of these bonds is 3 years, so you can’t sell them before the 3 years.
      2 – The interest on these bonds is fully taxable under the head of ‘income from other source’. However, TDS on the interest payable will not be deducted
      3 – There won’t be any tax implications on redemption. On maturity principal is tax free

  • Hi,
    Post is really good. I have one query.
    I have one commercial office bought in 2002 and I want to sell it now. I read all information about capital gain. I want know that whether I purchase another Commercial office by selling current one?
    Purchased value: 1000000/-
    Sell value approx: 5000000/-
    What will my tax percentage? and can I do as I mentioned above or Compulsory I have to buy residential land or house?

    Thanks in advanced

  • Hi, thanks for all the insights in your blog.. two quick ques i have:

    1) will I able to repay loan of my 2nd home (say h2 which is purchased within last 1 year) from the capital gain i will have from sell of house h1? P.s. I have one more house (say h3) on my name which is purchased 5 yrs back.. does it matter anywhere here? since it means i have multiple properties on my name..

    2) House h2 I purchased already but it is under construction. And importantly sale deed is not done yet. I have taken loan based on notarized agreement with builder. Possession is due in Aug-2016 so the sale deed registration.
    In this case, in the context of last 1 year purchase, what is the sale time considered Aug-2016? or when i made first payment disbursement i.e. Jan-2016?

    thanks much in advance

    • and one more que to above
      3) the second house which i bought is a joint buying (me and my father). First house which i m going to sell is only on my name. Am I still eligible to fully avoid tax by investing LTCG in my second home (which is joint property)?

      • Dear Ankit,
        To provide answers to your queries, kindly note that we need to have detailed discussion on this. Suggest you to take help of a Chartered Accountant.

  • I have a flat which i bought in April 2008 and now I ‘m selling it , I booked another flat in 2010 , possession of that flat will be very soon in 1-2 month registry has not done yet for another flat.

    Can I use the LTCG from 1st property to pay the home loan for second one , will I get the tax exemption under section 54.
    if that is the case whether I should pay the home loan before registry of second flat or after or it doesn’t matter.

    • Dear Shreesh,
      Exemption under section 54/54F can be claimed if the sale proceeds are utilized within one year before or 2 years after the date of transfer. So where a house is bought one year before the date of transfer by taking loan and you sell your house property and use that amount to pay back the loan, such repayment should be taken as fulfilling the condition of using the sale proceeds.

  • In case of parag reply 0n 14 April 2016 you have replied that the profit after indexation can be reinvested into another property to save LTCG. But I think recently last year it has been modified to one house only. If you own one house and seel and reinvest in another you pay no tax on LTCG. If more than one than one has to pay tax.

    • Dear sonu,
      I believe that this condition is applicable u/s 54 F only.
      Could you please share any link that can provide more information about your point.

  • Few questions:
    For the purpose of ltcg,
    1) Does flat purchase price/ acquisition cost include stamp duty, registration, society formation charges, parking? Will all of that together be your net cost?
    2) from sae price, can you reduce brokerage and society transfer charges, if any?
    3) can you reinvest only the taxable portion in a new property to avoid taxes or the entire amount from sale has to be invested?

    • Dear Umang,
      1 – While calculating capital gains, expenses related to transfer / sale like advertisement expenses, brokerage expense, Stamp duty, Sale deed registration fees, Legal (lawyer) expenses etc., can be deducted from the Purchase price. I am not sure about society formation & parking charges.
      2 – Which section are you referring to?

  • Hallo Sir,
    I am Himatkumar Shah From Goa, I was bought commercial land @350000 And stamp duty 25000 in FY 2009-10 and did their commercial business also. After five years FY 2015-16 sell commercial land of Rs 450000 I was not use of this amount of Rs 450000 till the date. so what was the liability of long term capital gain on this case please guide me and also suggest.

    • Dear Himatkumar,
      You have to pay taxes on the long term capital gains, you need to include these gains in your Income Tax Return AY 2016-17.
      When did you sell the plot in FY 2015-16?

  • Dear Sir ,
    Good information.
    As I went through the quirries and you responses, I have some observation on the applicability of LTCG tax in case of owning 2 flats .
    Reading through two querries of Feb11th, one at 1.28 (LTCG)and another at 1.44([email protected]), I got confused as you response looks contradicting – while owning two flats is okeyed in first case, caution is expressed in second (not to be owning a second house)
    while 54 is exclusive for residential property and do not have the clause of two house ownership, 54F is for all longterm capital assets.Why would residential property be considered under 54F at all? Is it because of using CGaccount?
    My second querry is – Plot is considered as residential property or just long term capital?
    Thanks for your anticipated response.

    • Dear Mr Mani,
      I believe that residential property here means ‘house’. However both land & house are capital assets.
      I am not sure as to why they have included the referred ‘clause’ in the guidelines.

  • IF I PURCHASE LAND ON 2010-11 @ 7 LAC. ITS AGRICULTURAL LAND. NOW I CONVERT IT IN NA AND THAN I SALE IT @ 70 LAC SO HOW TO CALCULATE TAX AND HOW I SAVE TAX ?

  • I bought a residential property X in 2006-2007 for 22 lacs. I bought another residential property Y in 2012-2013 for 19 lacs. Now I want to sell property X for 170 lacs in 2016-2017 out of which the long term capital gains is 125 lacs so can I invest this amount to buy another residential property to save tax?

  • Dear Sreekanth,

    Can you let me know the following please –

    I solely own an under construction flat registered on 31-Dec-2013. till date it is not in my possession and is expected to complete in few months now.

    1. When can i sell this flat earliest to be eligible for saving LTCG ? i.e. 36 months from registration date or possession date ?

    2. Can i invest this entire sale amount in new flat with joint holder keeping wife as first holder & me as second holder ?

    3. Can home loan interest be deducted for Capital Gain calculation ?

    • Dear Rohit,
      1 – It’s from the registration date..
      2 – Kindly note ‘the new property must only be bought on the name of the seller and not on anybody else’s name. Joint ownership can be acceptable but exemption can be limited to the share of ownership.’
      3 – Very good question. There have been some court judgements made in regards to this. Based on these, it has been declared that ‘home loan interest payments’ can be used while calculation calculate ‘Capital Gains’ too, besides u/s 24 (to claim tax exemption).

  • Dear Reddy Sir,

    Can we get deduction of stamp duty paid at the time of sale (if same has been mentioned in agreement that stamp duty to be borne by seller), while calculating short term capital gain?

  • Dear Sreekanth,

    Thanks very much for this informative article. I am sure it is helping out a lot of bewildered people out there.

    I wonder if you would kindly provide me some advice. I had land that was purchased in 1989. It was sold about one year ago in March 2015. I wish I had read your article then. My agent told me there would be no tax since it is long term capital gains. I live abroad. In August 2015 a letter was delivered to my home address in India from the IT department asking me to respond within 7 days regarding capital gains. My agent told me after consulting a chartered accountant that it can be taken care of when I visit India. From your article it is now clear that 20% of capital gains will be incurred as tax, which is a substantial amount. My questions are as follows:

    1. On the sale deed the property is noted as a vacant land. It is a residential plot. Since it was owned for about 15 years, can expenses related to the property (even if it was finally sold as vacant land) be deducted after indexation to reduce capital gains tax? I am referring to expenses such as boundary wall construction (which over the years got damaged, had to be repaired, etc.), foundation construction (upon which nothing got built), property maintenance (clearing, etc.), employing somebody to secure and guard the property. Any other expenses that you can think of that are normally incurred over the course of 10-15 years to improve/maintain a residential plot that can be deducted for capital gains tax reduction?

    2. Another complication is that due to delay in tax payment, I have to now pay 1% per month interest on tax owed. What can I do to avoid that? Will there be penalty provisions invoked because of delay in responding to the letter from the IT department? Will a copy of my foreign passport be sufficient to justify and excuse me from these provisions (interest and penalty). Can you please elaborate on what I may be facing here and what I can do about it?

    I would appreciate your responding to my questions as soon as you can and providing me any helpful advice in reducing my capital gains tax.

    Thanks,
    Akshay

    • Dear Akshay,
      Below expenses can be deducted from the sale price;
      * Brokerage or commission paid for securing a purchaser
      * Cost of stamp papers
      * Travelling expenses in connection with transfer – these may be incurred after the transfer has been affected.

      I am not sure if ‘construction of compound walls etc’ can be considered as ‘cost of improvement’. Kindly go through this judgement which can be relevant to your case.Click here..
      Suggest you to get in touch with CA directly and sort this out. Kindly clear your tax dues (if any) at the earliest and do not postpone the matter further.

  • Dear Sreekanth,

    Thanks for sharing your valuable knowledge on this forum. I have a question on the capital gains tax applicability in case of joint ownership with wife. My wife is a home maker and the flat is in our joint ownership (Her contribution was her parent’s gift at marriage and I paid the remaining amount using a loan).
    Now can the capital gains be shared between us? If 10,00,000 is the long term capital gains after indexation, will I be able to show 500000 as my capital gains and 500000 as my wife’s gains?

    Thanks in advance for your response

    • A followup question is: what can be claimed as ” cost of improvement”? Is it wood work, periodic maintenance? What kind of supporting documents are needed for this claim?

      Regards,
      Ravi

      • Dear Ravi,
        Wood work and all will not be considered as ‘cost of improvement’.
        Kindly go through this example;

        Cost of improvement, as the name suggest, does n’t mean normal repairs.
        Suppose one has purchased a house constructed upto Ground floor only on 1.12.2007 for Rs 500000. Price paid- will be cost of acquisition. Now, the sidewalls which were of 5 feet hieght only, raised to 7 feet till 31.3.2008. Expenditure incurred 30000. It is the improvement cost.

        After sometime, according to plan ans permission , he slowly starts to constructs First Floor. Upto 31.3.2010 he incurs expenditure of Rs 40500/-. From 1.4.2010 to 28.06.2010 the work has been completed and further Rs. 80500/ has been spent. These costs will be added to the cost of the property as cost of improvement.
        As on 1.03.2011 , suppose this entire house is sold. Indexation will be made in respect of Cost of acquisition as Cost of Improvement in the following manner , so as to arrive Total Indexed Cost of the property-
        1. INDEXED COST OF ACQUISITION =(500000 x CIF 2010-11)/CIF 2007-08
        2. INDEXED COST OF IMPROVEMENT =(30000 x CIF 2010-11)/CIF 2007-08+ (40500x CIF 2010-11)/CIF 2009-10+(80500 x CIF 2010-11)/CIF 2010-11.
        3. TOTAL INDEXED COST =1+2

  • Hi Sreekanth,
    Very informative article.

    I sold my flat and wish to know the exact amount of LTCG. below are the details of transactions:
    Flat purchased : March 2009
    Purchased price : 25L (basic: 22,43,125, stamp duty & reg. 1.,25,000, parking 75000 and mseb & soc. 65000)
    Flat sold : Feb 2016.
    Selling price : 54L

    Can you please help me to confirm what will be the exact LTCG in these transaction?

    Awaiting for your reply.

    Thanks,
    Deepa

    • Also, I want to invest LTCG in new flat in this year. Can this LTCG is used for stamp duty and registration for new flat and remaining amount in basic price of new flat?
      eg. if my LTCG is 10L. If new flat stamp duty and reg. is 3L , can i invest this LTCG against this stamp duty and remaining 7L to downpayment for new flat to save LTCG tax?

      • Dear Deepa,
        I believe that as stamp duty & registration costs are included in the acquisition cost, you can use the LTCG proceeds for the same and save on taxes.

  • Hello sir, I had purchased flat worth RS. 20 lacs in August 2014 and took loan of RS. 17.45 lacs. Flat is in joint name with my father. I had purchased another flat worth RS. 19.90 lacs in March, 2016 and took loan of RS. 18 lacs. Flat is in joint name with my wife. Now how should I disclose my both loan in my it return? What is the best way to show off in itr?

  • Dear Sir,
    I have purchased a flat in 2005 in Rs. 4.60 lakh and sold it in January 2016 at Rs. 7 lakhs. The Index cost of purchase is 4,60,000 * 1081/497 = 9,99,598.00. Thus, I have sold it in lesser value than the index cost of purchase. I would like to know the following:
    1. Should I have to show this income in ITR
    2. Should I have to reinvest the amount Rs. 7 lakhs
    3. If I have to reinvest, what is the last date to reinvest it.
    4. What are the options available with me to save tax in case it is necessary to show it in ITR

    PLEASE REPLY. anxiously waiting Sir

    • Dear Ranjeet,
      1 – Yes, you can show this under section CFL schedule (carried forward losses).
      2 – No.
      4 – You can SET-OFF these capital losses with the capital gains (if any) under the same head (income from property) or with capital gains earned under any other HEAD.
      Else, you can also carried forward these losses for next 8 years and can set-off against same head profits in the future.

  • Hi Sreekanth,

    I bought the panchayat approved plot in 2000 and was registered like agriculture land (Means mentioned as plot but registration rate is agriculture land and Not in square yards) after that i have sold that plot in 2013 (square yards). The plot is located in panchayat area and it will also come into UDA jurisdiction it was not regularized by UDA and the plot do not have 30 feet roads and no common public place allotted. Please let me know weather this can be treated as plot or agricultural land and will attract to capital gain?

    • Dear Jagadeesh..Can’t advise on this without actually looking into the documents and also without knowing about the location. Suggest you to take help of a local legal expert.

    • We sold a 9 Marla plot in a village in India in July 2015 for Rs. 450000, but sale deed will be done in April 2016. I have one third share in that sale proceed; we being 3 brothers. Where shall I mention my share Rs. 150000 in the IT return. The plot came in our name in March 2014 after demise of father. I do not know its purchase value and date of purchase. Whether should I pay tax on 150000 or not as the sale deed has not been done, and if yes, how much.

      • Dear Gurmit,
        There is no need to mention the sale amount (your share) in ITR. You have to calculate & show ‘capital gains’ and pay taxes (STCG taxes if any, in your case).
        Suggest you to take help of a CA.

  • Dear Sir,
    Greetings.
    I bought a residential property on oct 2014 ,I would like to sell it on april 2016.One of my friend who is a CA has advised me to invest in the capital gains account in sbi .other friend who is also ca has advised me that there are no STCG Exemptions i cant go for the sbi capital gains account.please advise if i could go for the sbi capital gains account by selling the property for a stipulated period.

    • Dear SHEKHAR..Yes, no exemptions are available on STCG.
      Capital gains tax on Short term gains is unavoidable and no exemptions are available to minimize your tax liability.

  • Dear Sir,
    If a person sale its residential house and invest the sale proceed in construction of commercial building. Will he be able to receive any exemption in Capital Gain?

  • Hello sir,

    My Question is I sold a property in delhi and after few day i bought a flat and some furniture item like( sofa, table etc.)
    So question is will that cost of sofa and table will be considered as a part of flat cost.

    Thanks

  • My mother wants to sell out her landed property at her home town for 45lacs. We are two brothers wishing to purchase a flat at Pune for 65lacs. How to invest the solded land property value in the new property where we both brothers will pay the difference without going for Capital gains. Can we claim hbl relief us 24b?. Pl suggest best options. Also the order of property holders for new registration. Secondly, The buyer wishes to pay some cash against the purchase, but we are opting for DD/Money transfer. How to avoid future complications on Capital gains.

    • Dear SSRao,
      Your mother can consider gifting the property to both of you (may be equal ownership share). No taxes are levied for this transaction. You can get GIFT DEED done for this.
      Read: Gifts & income tax implications.
      You can then invest this money in the new property.
      For the different amount (65-45L) you can take a home loan and you can claim income tax benefits u/s 24.
      Read: Home loan & tax benefits.
      Accepting the full amount in DD/Wire transfer is the best way.

  • Dear Sir,
    I am selling a house built-up on agricultural land in Aril-2016. And at the moment we (wife & me) own flat purchased jointly. The flat was purchased in Feb. 2015. Now, by selling that house built-up on agricultural land I want to buy second flat. The cost of second flat is more than the house built-up on agricultural land.
    I have below questions:
    1. Can I use the amount from house built-up on agricultural land to purchase that second flat?

    • Dear Dinesh,
      We need to check if the Agricultural land falls within the limits of Urban / rural civic bodies.
      I believe that you can use the amount to buy another residential flat. Suggest you to check with a CA too and then take the decision.

  • Hi streak th,

    Can I use the LTCG for part payment of my second home loan by which I can save interest. Is it an option?

      • Hi Sreekanth,

        I have a flat in Hyderabad which I bought in 2010. Last Sept 2015 I got the possession after fighting with the builder.Now I’m selling the flat with almost no profit for 26 lakh. When I bought in 2010 it cost me around 21 lakh but in sale deed the value was around 101000. But now the buyer wants to show the full 26 lakh in sale deed. So as per me than the capital gains will be 260000-1010000=1590000. Is it correct? If yes than how I can I save the tax on the same amount? Pls suggest

  • Dear Sreekanth,

    My father sold an 30 years old property & got some 82 lakhs. Considering that the whole amount is LTCG, he is looking for a new property but that is costing 96lakhs. As he is senior citizen & retired now, hence is it possible for me to become co-owner in the new property & take housing loan of Rs 14lakhs on the new property? Will my father get benefit under section 54??

  • Hi Sreekanth, I purchased an apartment in April 2014 at 40 lakhs. I want to sell it now at 60 lakhs and invest the entire 60 lakhs on another apartment (under construction). Will this set of transactions attract any capital gain tax?

    • Dear Joy,
      This is treated as Short Term Capital Gains and the gains will be taxed as per your income tax slab rate.
      (If Land or house property is held for 36 months or less then that Asset is treated as Short Term Capital Asset. You as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL) on that investment.)

  • If I own a Resi. Plot, say Plot A, since 10 years.

    Want to sell the Plot A & buy a New Plot B partially from sales proceeeds.

    Balance money is parked in CGAS.

    Money is withdrawn from CGAS gradually & a Resi. house is constructed on Plot B within 2 years of sale of Plot A.

    Total money from sale of Plot A is used up in buying Plot B & constructing a Resi house on it.

    Is LTCG saving allowed under Sec 54 of IT.

  • I own 2 Flats (say Flat A & Flat B) , for more than 10 years (so eligible for for LTCG).

    Want to sell Flat A & from sales proceed want to buy a New Flat (say C) to save LTCG.

    Will not sell Flat B.

    So finally I will own 2 Flats => Flat B & Flat C.

    Is LTCG saving allowed u/s Sec54 of IT act, in such a case ???

  • dear sir, i booked a residential property in 2014 and complete payment was done by dec 2014. but registration is not done yet. the cost of registration is 4 lakhs.
    Now i am selling my old property by march 2016 and LTCG is around 8 lakhs.
    Sir can i use 4 lakhs for registration in april 2016 of new property to save the LTCG tax.

    • Dear sukhveer..Yes you can use the sale proceeds of sale transaction to buy/register 2014 property (it should be a residential property) and save on LTCG taxes.
      Do consult a CA.

  • Hi Sreekanth,

    I found this a valuable blog. Please advise me in the scenario.

    I brought a flat in FY 2008-09 at 20L in joint ownership with my brother, where we took a loan of around 16L from bank (joint loan). Now it’s getting sold at 45L in FY2015-16. So, it’s indexed cost is 37.15L. This leads to LTCG around 8L. We will close the loan of around 14L remaining (checked with bank), which lead me with remaining 31L in my kitty. My queries are:
    1. I assume i would have to only keep 8L in CGAS scheme account, which needs to be invested in residential flat in 2 years, instead of complete 31L to save LTCG tax. Correct? The rest 23L (31 – 8) can I keep in our normal Saving account, to be used as per my wish ( to pay of my certain liabilites and to add along with 8L LTCG to buy property)?
    2. Does this 23L in saving account (could be divided between me and my brother’s Saving accounts) would attaract any tax?
    2. This 8L need to be in CGAS scheme before 31 july 2016, but as of now can it be in our regular Saving account?
    3. From the sale proceed, 8L LTCG + some money of the 23 L, we want to invest in 2 residential flats in each of my brother’s name seperately. To accomplish this what could be the requirements/restrcitions, kindly confirm.
    a) CGAS account in joint name?
    b) rest money in any one’s Saving account or should be divided in both accounts?

    I would be really thankful for the advise.

  • Very nice article and clarifies most of the quires that I had.
    Is there any way out, if the actual sale price is more than the one in documentation? In case of a rural agri land, the gain from the sale price – purchase price in document is not taxable. How abt the extra amount which is not part of the document.

  • Hi Sreekanth,
    I have sold a plot & holding the proceeds in Capital gains accounts in a bank.
    I want to buy a new residential plot by using this money however from your statement below, I am perplexed if I could use the money with zero LTCG tax?
    “•Capital Gain Tax cannot be saved if the sale proceeds are invested in a commercial property, agricultural land or plot”

    I’ll be grateful if you could reconfirm.
    Thank you,

    Vivek

  • As i have not filed my return for financial year 2012-13 and i have sold a land for Rs 400000 to my relatives but payment for the said amount is received in the financial year 2014-2015. so now should i have to pay long term capital gain in financial year 2014-2015 and also i have received the said payment in cash.

  • Dear Sir

    I have sold my flat during this FY. I also own an another under construction property.
    Can I save LTCG tax by investing in one more property / flat ?

    Regards

    Rina

  • Dear Sreekanth, Since i am planning to start agriculture farming, If i sell my residential house property in city and buy an agriculture land plus build a farm house within 1 to 3 year, will that amount be exempt from long LTCG tax .

    Thanx.

  • Dear Ravi

    I had purchased a plot in 1998 and it will fetch a market price of INR 2,630,000 (twenty six lakhs thirty thousand). What are the option for tax exemption? Can I invest all the proceeds into Infrastructure bonds? Please advise

  • Hi Sreekanth,

    Nice article and easy to understand, thanks for your efforts. I dont seem to find info. on one issue though. Say, I bought a plot in 2000 for 1 lakh (sale deed value) and constructed a house by spending about 8 lakhs (which is an estimate, this is in a remote town, 15 yrs back, so no bills to prove we have spent 5 lakhs). Now, I want to sell the property for say 70lakhs. I understand that I need to pay long term capital gains. My question is – how do I come up with a purchase price in 2000? I dont have any proof other than the sale deed showing we purchased the plot at 1 lakh.
    Should I get a valuer or a chartered accountant and ask him to deduce the value back in 2000? or
    should I simply take the cost of construction as of 2015-16 as 1000/sf and estimate value back in the year 2000? (1000*406(1081) = 373.5) and multiply it with built-up area (1200 sf)

    We made some improvements to the house with 2 lakhs back in 2010. How do we account for that?

    Please help. Thanks in advance.

    • Dear Ravi,
      Construction Cost estimate is always a subjective matter. You can take help of a ‘registered valuer’ and get the right cost. Else you can consider your estimated cost and project it by using appropriate index value.
      If you have spent money for repair of property (Cost of improvement) after the year of purchase, that cost is also required to be indexed (as per CII calculation) and added to Indexed purchase price.

  • Dear Sir
    Very informative article.
    I have one query…
    I want to sell my plot and purchase new plot adding my other savings since it is costlier than old one. Will it cost any capital gain. I am having one flat in my name. The plot so purchased will be used to construct a house for my own use but it may take time.

      • I already own a plot in my town and after selling it I want to purchase another plot and all the amount so will be realized from the current plot will be invested in new plot (to be purchased) where I want to construct a house in future. The plot presently own by me is purchased four year back. so by investing all the amount in purchasing another plot can I save long term capital gain.

  • Thank you Srikanth for well written articles … replying to each readers questions is awesome!

    I had a quick query on LTCG. As per section 54F long term capital gains from sale of plot can be invested in puchasing a house. However if the seller in this case already owns a own home will they still be allowed to purchase a another home and save on taxes?

    Thank you,
    Ravi

  • Hey Rohan,
    Very informative article. I am becoming a regular reader of some of your articles. Would suggest if you could sometimes explain with examples too.

    I have few queries that I was not able to understand:
    So in case of sale of land to buy residential property
    1. till the time I purchase a new residential property, I need to invest the entire sale proceeds(Rs X) or just the capital gains amount (Rs. Y where Y < X) in CGAS account? In case of later (Y-X) is taxable as per IT tax slabs while in case of former where entire sale proceeds is invested in CGAS then this entire account is exempted provided I do not sell the new residential property within 3 years?
    2. Can I decide what amount I need to put in CGAS based on my tax slab? Say I have tax slab exemption till 3 L, and I will receive an amount of 33L from sale of land. So I can keep 3L for end use and deposit 30L in CGAS account?
    3. Even if the buyer of the land paid a small % of amount in say FY15-16 but the transfer of land would happen in next FY then the time period of 2 years to buy the Under construction property starts from FY 15-16 or FY 16-17.
    4. Also we consider the actual date of transfer or the fiscal year of the date of transfer of land? Eg: Suppose the transfer happens on April 2016, then latest the new property must be purchased (considering 2 yrs UC residential property) is by April 2018 (actual date) or March 2019 (Fiscal year)
    5. You mentioned the construction of new residential property has to be completed within 3 years of transfer of sale. Do we need to submit any proof like OC? What if for any reason the UC property is delayed and will not be completed within 3 years?
    6. Can you explain with example: "Joint ownership can be acceptable but exemption can be limited to the share of ownership"

    Thanks

    • Dear Rohan,

      1 – Only Capital gains can be deposited. Capital gains will be obviously less than the entire sale proceeds right. Or am i missing something here? A capital gains account scheme gives you the window of deferring your tax liability till the funds are utilized. If your gains are held in this account then you are exempted from paying tax on the long term capital gains for the respective year. Even if the sale is effected in, say, the first month of the financial year (say, April 2014), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April 2014 to July 2015) as he likes
      2 – You can deposit only gains.
      3 & 4 – Registration date is important.
      5 – Withdrawals form CGAS should be done by submitting a prescribed form. I believe that no proofs are required.
      6 – If you own say 50% of the property (this can be mentioned in sale deed) , then the exemption limit is limited to 50% only.

      • Dear Sreekanth,

        Thanks for your response.

        1. Not sure from my query where the question arised that Capital gains can be greater than transfer of sale. I know it would be less. Just to confirm, the capital gains is post indexation, the calculation of which you have posted in the above blog? Also this was a new information that I learnt that the CG amount can be invested in CGAS account by last day of filing tax returns.
        2. ok
        3-4: Registration DATE – Can you confirm this as the date when I transfer the property to the buyer.
        5. Sorry but my query and your response on this point not sure how they are aligned. My query – “You mentioned the construction of new residential property has to be completed within 3 years of transfer of sale. Do we need to submit any proof like OC [during tax returns on the 3rd year]? What if for any reason the UC property is delayed and will not be completed within 3 years?”

        Just to add on to the above question – I am interested in an UC residential property but the planned possesion is 4-5 years from the proposed date of sale. So wanted to understand whether entering into an agreement with the purchase of this residential property would be helpful in tax exemption or not.

        6. To the query on ownership and exemption limit, the limitation of the exemption limit is on capital gains or the cost of new property intended to purchase. Suppose the new residential property is of 1 Cr. The ownership of the flat will be split between 2, so 50% ownership each. If the Capital gains amount is 25 Lakhs, then the exemption limit is based on 50% of 25 Lakhs or 50% of 1Cr? In case of later, is it necessary to have transaction done totalling Rs. 50 Lakhs from each of the 2 owners.

        New query:
        7. Also the plot that is being discussed was purchased around 10 years back by my father. On his demise few years back, this FY 2015-16 we transferred the plot in the name of my mother. Can you confirm this sale will be under Long Term Capital Gains or Short Term Capital gains

        8. I have mentioned that there was a token amount given in this FY 2015-16. However the final amount and transfer of land will be in 2016-17. In that case, do I need to mention the token amount received during this FY in tax return filing for FY 15-16 or mention the total amount received from the sale in next FY 16-17?

        • Dear Rohan,

          All your queries are good and very much valid ones. I believe that it is better you consult a Chartered Accountant in person and get detailed explanations / confirmations. Kindly note that I am not an expert in taxation issues.
          You may kindly post your learning here.

  • Pl accept my congratulations for coming out with such an informative article in simple language. I would request you to kindly confirm whether the ‘1 year before’ investment option is available in the case of sale proceeds of a non-agri vacnt land being appropriated towards a residential property purchased within the last 12 months. I may add that the assessee owns no other residential property.

  • Very useful info sreekanth. Thanks for sharing. Are you sure sale of agri land does not attract capital gains?

    • Dear Jagadish,

      Agricultural land in Rural Area India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains.

      Definition of Rural Area – Any area which is outside the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is considered Rural Area, if it does not fall within distance(to be measured aerially) given below –

      * 2kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10,000 but not more than 1lakh
      * 6kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 1lakh but not more than 10 lakh
      * 8kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10lakh.

      Kindly note this is applicable only for Agri lands located in rural area.

  • I purchased a flat during the year 2012 with registered docs but loan was released from 2011 n also closed the loan during fy 14-15 now I want to purchase a new selling old let me whether tax has to be paid which I had claims in 80c from fy 11 to 15 or whether I can avoid in fy 16-17 for term of 5 yrs. Also let me know since I closed loan before 5 yrs there will no problem of recalling the tax exemptions

    • Dear Ramnath,
      If you have sold your residential house within five years after purchasing it, you may have to forgo your tax benefits.Did you file your income tax returns accordingly for FY 14-15 (AY 15-16)?

      The entire amount of deduction claimed under Section 80C in prior years on the amount of the principal repayment will be added to the taxable income in the year of sale of the property. Also, no income tax deductions shall be allowed in respect of repayments made during the year of sale of the property.

      Kindly note that this rollback is applicable only to deduction(s) claimed under Section 80C. Deductions claimed under Section 24 (b) on interest payable on your home loan will not be withdrawn.

      Kindly read: 8 ways you could lose your income tax benefits.

      • A very useful information on capital gain taxation.
        I still have some confusion,perhaps not understood well.
        I have a few querries.
        1.My wife had two plots adjoining each other in south India – held for 30 years.
        2.The plots were sold in Dec2015 to a couple – one to husband and another to wife @ 14.7 lacs each.
        3.By investing the respective proceeds in NHAI and REC bonds ( being less than 50 Lacs in total) within 6 months of registration, can the LCGT be totally avoided. – under 54EC
        4.No intention of of investing in residential house as she is already nearing 70.She is a house wife and has no residential property.
        5.As the indexation benefit is very low have not bothered to take advantage of the same.
        Would appreciate your advice.

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