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."
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
Dear VIVEK..Yes, one needs to buy a residential house only and not a vacant plot.
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 Gopal..When did you buy & sell (registration years) the property? What was the registration amount (on sale)?
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 Rina..Did you make LTCG or STCG?
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 Jaikishen..I believe that you can not save on LTCG taxes in this scenario.
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
Dear Ramakrishna..Kindly go through the points given in the article.
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.
Dear Vijay..I did not understand your query. Kindly rephrase it.
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.
Dear Vijay..You can save taxes on LTCG only by buying a new house or by building a new residential house.
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
Dear Ravi..No, not allowed. You should not own more than one residential house prior to this investment.
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.
Dear Sreekanth,
Your view on the above query posted would be of great help.
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.
View Comments
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
Dear VIVEK..Yes, one needs to buy a residential house only and not a vacant plot.
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 Gopal..When did you buy & sell (registration years) the property? What was the registration amount (on sale)?
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 Rina..Did you make LTCG or STCG?
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 Jaikishen..I believe that you can not save on LTCG taxes in this scenario.
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
Dear Ramakrishna..Kindly go through the points given in the article.
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.
Dear Vijay..I did not understand your query. Kindly rephrase it.
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.
Dear Vijay..You can save taxes on LTCG only by buying a new house or by building a new residential house.
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
Dear Ravi..No, not allowed. You should not own more than one residential house prior to this investment.
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.
Dear Sreekanth,
Your view on the above query posted would be of great help.
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.
Dear Varadan..yes it is available.