How to save Capital Gains Tax on Sale of Land / House Property?
Capital assettypically 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 less24 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 monthsmore 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.
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.
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 –
Below is the Cost Inflation Index Table from 2001-02 to FY 2020-21 for your reference. Cost Inflation Index (CII) for FY 2020-21/ AY 2021-22 Notified by CBDT at 280.
What are the applicable Capital Gains Tax Rates on Sale of Property AY 2021-22?
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 lakhduring 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 propertyor in another vacant plot.
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 acquisitionsand 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 loansthen 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.
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.
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
This post was last modified on September 28, 2023 6:32 pm
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 14 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. The information provided, therefore, should not be viewed as financial, legal, accounting, tax or investment advice."
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 Nikhil,
You can consider the Allotment date and take 2001 as the base year.
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.)"
View Comments
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 Mustaqeem,
To get tax exemption on LTCG, the new property should be in the name of your grandmother only.
Also, one can not buy multiple new properties to claim tax exemption.
Read :
Gifts & tax implications.
5 ways of transferring real estate property!
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 Nikhil,
You can consider the Allotment date and take 2001 as the base year.
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.)"