Sec 54 provides relief from the tax on long term capital gains earned from residential property while Sec 54F covers assets other than this. However, there are certain rules which the assesse has to remember to claim benefits under these sections.Take the case of Rajeev who has invested in a land three years ago. He was amazed to see the appreciation of his investment. Without wasting time he sold the asset fetching handsome returns and bought another land which he expects to deliver him similar, if not more. But the rude shock came to him when he was denied the tax benefit on his gains and has to pay a hefty amount to income tax. The reason was misunderstanding of Sec 54F under which he was claiming the tax exemption.
Here I have discussed some of the rules under the two sections – 54 & 54F where an investor gaining from selling of property or other assets can claim tax exemption.
Sec 54
This is the section for availing tax benefit on long term capital gains arising from a residential property. Under this section if a residential house is sold after three year of purchase then one can avail tax exemptions on the gains by investing them in following options-
- A new residential property either bought within two years or constructed within three years from date of transfer of existing property. In case of buying a new property, the exemption is available even if it is bought within one year before the date of transfer.
- There might be a situation when you would not have decided on a new property but do not want to lock in the money in the bonds. In such instances, the money has to be deposited in a Capital Gains Account Scheme. This is a fixed deposit scheme specifically for long term capital gains earned from properties. The money can be kept there till three years, which is the threshold period for availing tax exemption. Till then you will be required to include the proof of deposit every year while filing your income tax return then only the tax exemption is available.
- The entire capital gains will be exempted where the amount of investment in new property or bonds is equal or greater than the capital gains earned.
One of the larger benefit of Section 54 is that one can hold n number of properties as on the date of transfer and still claim exemption on the gains.
Sec 54F
This section is available to all those assets other than residential houses. So for claiming long term capital gains arising from selling of land, this section is utilized. Here one can claim relief on the tax liability on capital gains but with following conditions:
- The options for claiming exemption are the same as under sec 54 .
- The amount of exemption available is derived as
Amount of investment*Capital Gains/Net Consideration
- One of the primary conditions which differentiate this section from Sec 54 is that the assesse can hold only one property other than the new residential property on the date of transfer. Even after purchase of the new property, no new property can be bought for three years else the capital gains become taxable.
- Thus, if one has made gains form a land then the exemption can be availed under Section 54F provided the conditions laid in the section are fulfilled.
- Unlike Sec 54, here the entire capital gains are exempted when the amount of investment is equal or greater than the net consideration else the proportionate exemption is allowed.
In both Sec 54 & Sec 54F, the exempted property cannot be sold within three years of acquisition else the taxability on gains will arise with respective section clauses. Both these sections are available to property investors for claiming long term capital gains tax exemptions. Apart from these, Capital Gains bonds under Sec 54EC are also available for claiming exemption of tax on long term capital gains earned from long term assets. But it’s wiser to take the help of an appropriate professional to utilize any of the sections illustrated here so that you do not face any disappointment later.
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Q1: Is Section 54F applicable for long term capital gain, earned by trading stocks outside India?
Q2: Can you please throw more light on difference between residential property and residential house? Section 54 taslk about residential house and here we are talking about residential property. Aren’t both different?
By definition Residential property would include residential plot, flat, independent house. Residential House will include only flat and independent house not the residential plot.
Thanking you in advance for your clarification.
Hi Arif,
1. As far as i know, long term capital gains earned on foreign equities do not fall under any tax exemption and one has to pay 20.6% LTCG tax on it.You can only adjust them with long term capital losses.Still you should get it confirmed with a CA as it comes under the global income earned by any resident which is taxed differently then domestic income.
2. A residential property here means any property which is used for residence which include a flat or an independent house but will not include a plot as it is a piece of land.
Sec 54 is applicable only to residential houses and sec 54F applies to other then residential houses which includes a plot. So when we are talking about residential property under sec 54 or for buying or constructing its a house.
Dear Mr Solanki,
Ownwership of more than one house plays a spoilsport in claiming exemption. In that case isn’t it wise to avoid joint ownership ex: husband and wife owning a house, where by they both own ‘a’ house in IT eyes.
2)In the new DTDC regime I heard this section is amended to exempt 54 and 54f exemptions can be claimed only if one do not own any residential units. kindly throw some light on this ?
Dear Mr.Thomas,
1. Yes if the house is in joint ownership then it will be counted as first house for both. However, owning more than one residential house is not a condition if the gains are earned from residential house i.e. under sec54. It is only when you earn long term gains other then residential houses this condition is imposed. Also, to own house individually or in joint, its a decision which most of the times rest on your financial situation.
2. DTC is yet to be implemented and it is going through many changes. Its difficult to say what will come in. There might be amendments in these Sections but not sure to what extent they will get implemented.
Dear Mr. Jitendra P.S Solanki,
Recently i came across a write up which has turned IT sec 54, LTCG exemption of residential property on its head. In fact it turned me on my head.
A ridiculous aspect was put that 54 LTCG can EVEN BE INVESTED IN SME units plant & machinery subject to 51% holding AS FER FY 13!??
Another came across re 54 LTCG — PUBLISHED in Business Standard, Mumbai, May 2,2011 by Mr.Sandeep Shanbhag which reads as under — quote
“CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income.
Even if the sale is effected in, say, the first month of the financial year (say, April 2011), 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 2011 to July 2012) as he likes”. — unquote
Are they not misleading on LTCG compliance? One on LTCG investment second completely disregarding 6 months, CGAS, either from sale date or ITR filing date, whichever is earlier.
Further no one has taken up 1% TDS issue, even ICAI is silent on it.
What if LTCG claim [say CGAS or bonds] short by 1% said TDS, no provision to remedy it. Assume the assesses have no income to file except LTCG claim returns. [Yes, 26AS credit even if not reflected in IT / not paid by the deductee / short paid, assesse can claim the same in ITR, but no such provision for 26QB & 16B furnishing.]
Solicit your valued comments.
Regards,
P.S – i’ll be writing to Business Standard re May 2011, aspects published.
Mr.Jitendra P.S Solanki,
Corrigendum :
In respect to my earlier post – pl read ‘as PER FY 13, not as ‘FER’.
Secondly, Business Standard quoted date is May 22, 2011 not May 2.
Kindly excuse the inadvertent typos.
Regards,
Dear Mr. Vinay,
1. In budget 2012 there was a proposal by Finance Minister Mr. Pranab Mukherjee for exempting capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant and machinery. I am not aware of its implementation and will have to look into it.
2. With regard to CGAS scheme, the income tax provision says you need to deposit the amount before due date of filing of the income tax return for that respective year which is 31st July and so the benefit of 15 months arises for any property sold in April. Also, there are two options-savings account and Fds here which work similar to your general account. And yes withdrawals are permitted only for the specified purpose only i.e. buying or constructing a new house. Infact some banks do not issue a cheque book for this account.
I hope this clarifies your doubt.
Respected sir
pls let me know what are the SPECIAL CONTIONS disallow benefit under
section 54 , long term capital gain comes from own purchase house property on my and my wife,s name (co owner)
and new property-house purchased in both name with in specified time limit and gain amount invested as per law and index calculation
Dear Mr. P.S Solanki,
Ref to your above answer & fwd to me the said caption provisions clause[s] of Finance Bill [proposed] 2012, thereafter passed.
If you so state & claim why was it tracked off?
As regards your point No2, answered in reply to me – why don’t you base it with highlight of IT secs 54, 54EC, 54F provisions & JUSTIFY 15 months filling? Get LTCG? Will you? Can you?
More importantly my aspect was 1% TDS! What if the seller is short of 1% to fulfill LTCG? The IT refund can come months later.
Can the seller not take 1% credit against 16B [with 26QB photocopy] – LTCG?
Solicit your comments!
Regards,
Dear Mr. Joshi,
One of the primary condition for exemption is that the exempted property/new property purchased cannot be sold within three years of acquisition else the taxability on gains will arise with respective section clauses. This means you need to hold the new property for at least three years period.
Dear Mr. Vinay,
The proposal in the budget for the said provision was under new section sec 54GB:
Relief from capital gains tax on sale of residential
property, if sale consideration is used for subscription to
equity of a manufacturing SME for purchase of new plant
and machinery.
You can read the details of relevant section here:
http://www.taxmann.com/taxmannflashes/BUD12-64e.htm
The inclusion of sec 54GB happened in the income tax act via this circular of CBDT-
http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=NOTF&schT=&csId=036bba0d-dc74-49c8-bc20-21450a97832c&NtN=44/2012&yr=ALL&sec=&sch=&title=Taxmann – Direct Tax Laws
So the benefit is there in income tax act now.
Thanks for raising this query which I hope is answered now…
Plot purchase Rs.10 lacs before three years and this plot sale on 36 lacs Profit Rs.26 Lacs. Now Rs.26 Lacs profit against i am purchase residence house. so applicable U/s.54?
Hi Mehul,
Any gains made from land is tax exempted under section 54F and not Sec 54.So you can claim the exemption as per sec 54F provisions.
I have booked a flat in oct 2010 which is under construction till today.
If I want to sell the right after 3 years and reinvest the money in other under construction flat, what will be tax liability to me.
Dear Mr. Kushawah,
As per Sec 54, you can invest the long term capital gains in an under construction residential property provided it gets completed within three years and you do not dispose it.
With regard to your capital gains, as per my knowledge, If you sell an under construction before possession then the long term capital gains are derived from the date of buying the right. If you have received possession before selling it, the LTCG will be calculated from the date of possession.
Do consult to a good CA for these calculations.
Dear Sir,
I am planning to sell one of my residential plots (land) that I have been owning for 5yrs. I own one house and couple of other plots (land) besides the property being sold. Can I use section 54F and claim exemption on long term gain by buying a flat (even if I own one house and 2 other pieces of land)?
If yes, can I sell each of other pieces of land and buy flat/house to get exemption under 54F?
If no, can I sell all 3 pieces of land and buy a single house (apart from the one house I own) using all the gains from all 3 plots and claim exemption using 54F?
Thanks in advance.
Regards,
Prasad
Dear Mr. Prasad,
For claiming benefit under section 54F the minimum condition has to be fulfilled. So if you hold more than one property other than the claimed asset then you will not be able to claim benefit under this section.
I have sold a land and wish to invest in a flat by investing the entire proceeeds. However, i wish to take it in the joint name of me and my father.My father has also sold a plot and wishes to invest the sale proceeds in the same flat. We plan to purchase this property in joint names. Can both of us claim exemption from LTCG? if so what is the procedure for filing returns?
Hello Sir.
I am planning to sell my land which I have purchased long back. Now I don’t have any flat or house on my name. So can I buy two houses or flats from the capital gains I earn? I mean will I get exemption on both the flats.
eg. I sold land for 40 lacs which I have purchased in 10 lacs. Now can I invest 30 lacs (deducting index value already) in two different flats and can claim exemption in both the flats?
Dear Mr. Krupa,
Since you earned gains from selling a Land, you will be able to claim benefit under Section 54 F.
As per my understanding and few cases upheld by different courts, you both should be able to claim tax exemption in the proportion of the contribution made.
However, i am not fully aware of its legalities and so you should consult a good CA who will be the right professional to guide you on your specific issue.
Hi Siddhanth,
If you have earned gains from selling land, then you will be able to claim exemption under sec 54F if you invest it in a residential house. Now with respect to your case of purchasing two houses, there have been different court cases and in one case the view of the courts in general was that “where two or more flats are acquired in the same apartment/complex and they are contiguous (adjoining) to each other and used as single residential unit, the exemption can be allowed for the cost of all those flats. However, where the flats are situated in different locations, then the exemption will be allowed only for one of the flats at the option of the assessee.”
So in my view, if you purchase two houses in different locations, exemptions will not be allowed on both the houses.
Hello Jitendra
I have sold a plot which also has a house on it. The proceeds are to be invested in a flat. I own 2 house properties as of now of which one is fully constructed and occupied. The other property is registered but is under construction at the time of the sale of the plot. Will Sec 54 F exemption be still applicable
Mahesh
Hi Mahesh,
As per Sec 54 provision you should not have another residential house apart from the house you are claiming exemption, on the date of transfer of original assets. So in my view if you have 2 other properties, you will not be eligible for Sec54F Exemption.
However, do consult a good tax expert on resolving your query.
Hi , i am planning to sell my ancestral property amt 2.5 cr
Is it possible to purchase two properties in two different location using that amount and avail tax exemption
Dear Navdeep,
In my view, Under section 54, i.e. selling of residential properties, you do not have any limitation on buying new properties.The location is not important and you can buy in any city.
Dear Mr. P. S Solanki,
I differ with your view, academic an aspect, requires representation to IT [FinMn]
IT, Mumbai a/o had escalated to IT Appeal, an issue of 54 LTCG, wherein an assesses IT return claimed having purchased two adjoining flats, from two different persons, then combined. Appeal allowed it BUT no clarity as IT secs not expressly wording it.
When LTCG arises from ‘the’ property sold & invested capital gains in ‘the’ property – exempt to the extent of investment.
Point is a single property sold to buy a single property.
The courts have also not defined this & in my considered opinion it may not be advisable to buy two different properties at two different locations from LTCG arising out of sale of a single property.
I recollect the scrutiny of the English language & definite article used in the said sec as deliberated upon by the court to surmise it & to mean ‘the’ property. In short — LTCG arising from sale of ‘the’ property, invested in ‘the’ property is tax exempt to the extent of invest.
You are referring to with explicit wording – selling of ‘properties’ & buying of ‘properties’. Whereas the query was – sale of ‘a’ property not properties.
Hence request to reconsider your valued post.
Regards,
IT appeals allowed assesses contention.
Hi Navdeep,
My interpretation on this aspect may not be right. Kindly take the help of a Chartered Accountant and an Advocate also on this issue as it involves the deep understanding of the taxation laws and court cases.
Hi Vinay,
Yes, there have been many cases in court where the benefit has been given to assesse on purchase of property adjacent to each other only. I got reference to many such cases along with a reference to the following case-
In CIT v. Smt.K.G.Rukminiamma [2011] it was held that the expression ‘a residential house’ used in section 54 does not convey the intention of the Legislature to mean a single residential house as eligible for exemption. If that was the intention, the Legislature might very well have used the word ‘one’ instead of ‘a residential house’.
Not a tax expert or a lawyer so can’t go much in detail of these.
Do you ave any view on this?
Dear Mr. P. S Solanki,
Yes, my view is we have to put it up to CBDT & FinMin asap for the clarification.
Further two different locations is different from two adjoining different flats/properties.
No tax advocate or CA will vouch for LTCG investment at two different locations. Exemption assured.
I’m escalating this to an ICAI member & who can undertake the issue to bring in experts views on the topic. It’s assumed the seller is sole inheritor. [explicit stated.]
If joint inheritor the question will not arise.
Will revert asap on getting other views.
Regards,
Dear Vinay,
Thanks for all your efforts in answering queries on taxation on such issues.
Will be looking forward for the experts views from you on the above query.
Dear Mr. P. S Solanki,
I’m definitely on this issue, somehow you have left 1% deduction & shortfall to meet LTCG in investment. Apart, i’ll come to you after escalating it to ICAI, CBDT & Revenue has to clarify on this on priority.
Actually Mr. Navdeep’s post is incomplete – as it doesn’t state his share in property – assumed it to be 100%!
But in the event if it’s joint inheritance the aspect is well settled.
However surprisingly Mr. Navdeep is yet silent, he should understand that w/o real facts presented a forum advisory can’t give any comments.
Further it’s important to make a note that neither the forum or the inputs can be made liable for any damages claim whatsoever, notwithstanding anything contained in any other aspects.
It’s normal a forum tries to put in max inputs w/o any liability on it’s part. However if the forum is abused a criminal action can be initiated against the persons.
This entails complete facts required as to purchase of two separate properties at two different locations.
A single seller can’t invest LTCG in two different properties at two different locations. Buy 1st property, balance to be kept in CGA/c, after five yrs or as banks free it also after three yrs buy second property.
Absurd a solution it can be. The requirement unknown!
Regards,
Dear Mr. Vinay,
I agree with you. Forums like these are made for sharing maximum inputs so that people searching for information on their issues can seek clarity. Although it may not resolve it completely as there are many complexities involved in some of them especially taxation matters but surely it gives a direction as to where one should take further assistance from the respective experts.
You have been instrumental in providing such inputs which is highly appreciated. With respect to Mr. Navdeep query, i am sure he will be taking assistance from other experts which i too have personally suggested him.
Keep sharing your valuable inputs. 🙂
Dear Mr. Solanki,
Firstly, would like to congratulate you for the article and thank you for taking time in educating the clarifying doubts of many.
I’m sharing below my case and the queries I have regarding Capital Gain and Taxation for the same.
I own a plot of residential land since May 2008 where I have not done any construction since purchase. Also, I had booked an apartment in Oct 2009 that got registered with the builder in May 2011 but I’m yet to get possession of the same. I’ve also taken a loan from banks for both these properties.
On browsing through the internet, my understanding is that if I sell both the above properties, then Section 54F will be applicable as both my properties cannot be termed as residential properties.
Have the below queries right now:
1. In case I sell the apartment booked in Oct 2009, will the capital gain be short term or long term? (I’m asking this as the registration has happened only May 2011).
a. In case the answer to the above is short term, can I save tax using Section 54/54F?
2. I’m assuming that selling the plot of land bought in May 2008 will attract only long term capital gain. Please confirm my understanding.
3. For both these properties, I have not taken any income tax exemption for interest paid to the banks. Can I add the interest paid to the cost of purchase of the property while calculating capital gain?
4. What are the options for me to save tax through Section 54/54F?
5. Is there a limitation on the number of properties I can hold or claim tax rebate on for Section 54 or 54F?
Regards,
Vinit Soni
hi
I have an ancestral property in Mumbai which has a building with tenants. I and 4 others are the owners and there are a few tenants in the building. The building is for redevlopment wherein owners are getting a particular amount and a equal flat each. I am getting an additional commercial unit. In the old building i already own a commercial unit only. So my questions are as follows
1) Will i be taxed on cash part also? Bulider says conveyyance will be given to the new society after OC. We will no longer own the land or building.
2) Since i am getting a flat and commercial unit ,what will be my tax on that and will owning a commercial unit already in the old building help me in any way?
3) The other owners have flats in the old building and so will they benefit from owning them (Sec54)? The agreement says new flats are not in exchange of flats in old building as I don’t have any flat and am still getting one. .Hence is there no transfer of flats.
4) The other owners already have another flat besides the old building flat so will they avail Sec 54 benefits still?
Dear sir,
I sold my property sometime on Nov,2012 and the capital gain is Rs.20 lakhs.
I opened Capital gain account in Indian Bank( SB Capital gain account) for Rs.20 lakhs in the month of July,2013( before due date for filing IT for that assessment year ) with the intention of using this money in buying a property within 2 years and constructing a new house within 3 years in a plot earlier purchased.
I purchased our ancestral house for RS.3 lakhs in April,2013 and spent Rs.7 lakhs for renovation/repair and construction of this house.Totally,I have spent Rs.10 lakhs in this house and used Rs.10 lakhs from the capital gain account for this purpose.
Now I am left with Rs.10 lakhs in my capital gain account.
I would like to know the following from you side:
a) Can I invest balance Rs.10 lakhs now in Rural Electrifiaction Corpn Ltd- Tax Bond with benefits under section 54ED of IT act for 3 years to avail tax exemption?
b) If REC tax bond is not possible now, can I use balance Rs.10 lakhs in costruction of another new house within 3 years from the date of selling property.Some people are telling that I can invest only in one property.Please clarify.Awaiting your immediate reply.
Regards,
V.L.Natarajan
Dear Mr.Vinit,
Thanks for the appreciation. I am putting my views within the study i have done :
1. In a real estate transaction long term capital gains are calculated if you have hold the asset for at least three years.But there is a difference when its an underconstruction property. In such cases if you sell it within the construction period the long term is calculated from the date of booking your right to purchase i.e. the date of tripatriate agreement you enter with builder or an allotment letter is issued to you for getting a right to purchase a defined house.
(This is not the date of booking a flat in a property where the construction has yet to be started and so the house no. is yet to be identified). But once you are given the possession,i.e. when the house is finally yours, then the long term gains is calculated from the date of possession. (Kindly verify this by taking help of CA ). The date of registration thus have very less relevance. Hence, in your case you need to look at the date of getting into the agreement where the exact house was identified or letter of allotment was issued. If its three years and still underconstruction, then on selling it you get the benefit of long term capital gains. Else once you get the possession, the date of possession will be taken for the LTCG Calculations.
2. Short term capital gains cannot be saved under these two sections
3. Land you bought in May 2008 will attract LTCG if sold after three years
4. No, interest cannot be added as cost of purchase. You can claim the interest paid on loan bought for construction of house U/s 24B i.e. upto Rs 1.5 lakh. But for any repayment during underconstruction, the total interest can be claimed only after the construction is completed and that too in 5 equal installment for 5 years within the limit of Rs 1.5 lakh. You cannot claim benefit of loan taken for purchasing a land.
5. The list is highlighted in this article. you can buy another house or invest in Capital gains Bonds but do keep it in the Capital Gains Scheme Account of banks if you decide to invest later.
6. Yes, there is a limitation under section 54F where you can hold only one property other than the new residential property (On which you are claiming exemption) on the date of transfer. Even after three years of purchase of the new property, no new property can be bought else the capital gains become taxable.. There is no such restriction under section 54 .
I hope i have clarified your doubts. But do take the help of a qualified CA especially since you have a underconstruction property where the terms of calculating LTCG are different and i have stated my views on the basis of study I have done.
Hi PM,
Difficult for me to answer your questions as i am not a tax expert. I am stating my views on some of it but you will need a good tax expert to have your queries resolved:
1. Yes you will be taxed on the cash part also. This is how CG will eb calculated
“In normal cases, the member would be regarded as having given up his existing flat and got a new flat and certain money in exchange for the old flat. Since an exchange is regarded as a transfer, such a transaction would be regarded as giving rise to capital gains. For computing the capital gains, the estimated market value of the new flat received in exchange would be added to the monetary amount received by the member to determine the consideration received by the member for giving up his existing flat. From this consideration, assuming that the capital gains is long term in nature (the flat has been held for at least three years), the member would be entitled to a deduction of the indexed cost of acquisition of his old flat. In case the flat was acquired before 1 April 1981, he would be entitled to substitute the fair market value of the flat as of that date and compute indexation from that date.”
2. Yes on these gains sec 54 benefit can be availed.
For rest of queries i don’t have much awareness. My advise for you is to seek the help a good expert since there has been many litigations in such cases reagarding the nature of gains in cash transactions.
Dear Mr.Natrajan,
1. Buying two different properties at different locations may not be viable for claiming sec 54 benefit. There are clarifications to be sought on such cases but I believe you may not get the exemption. You can read the above discussions thread where Mr. Vinay has clarified on this issue.
2. If you are stating about REC-Tax Free Bond, then they do not fall under this section and as far as I am aware Sec 54ED was applicable to gains made from listed shares and mutual funds which was dropped in 2006 as gains from these became tax free.
In general time limit for investing in bonds is within 6 months of transfer date.Its only for buying a house or construction 2-3 years time period is available.
Dear sir,
I understand that if you avail the benefit of 54F, you can not buy another new House property with in 3 years after you availed the exemption . Does this apply to only purchase of another House or Land also? Thanks very much for your time.
Hi Anwar,
This will mostly be applicable to property which fall under tax exemption. Since you do not get any exemption on land it should not be there. Still confirm from a tax expert.
Dear Mr. Jitendra P.S Solanki,
Sec 54, sec 54F, importantly LTCG, certain recent judgement’s are highlighted hereunder.
http://www.jitendrapssolanki.com/wp-content/uploads/2014/01/Recent-Judgements.pdf
Regards,
Disclaimer : The above should not be construed as legal / tax advise OR for that matter as expert an opinion. [yes, certain respected CA input is there.]
Neither I’am nor Mr.Solanki / the site ‘yourpocketmoney.com’, is liable or answerable to any untoward transaction exercised by any individual relying on the post.
This post is only meant to disseminate certain information for guidance only. Regards,
In the several taxation cases arising over a decade now, the MoF, CBDT, ITAT should come with clear understanding of LTCG, 54/54F or 54D/EC. STCG/LTCG of securities – equity shares trading in listed scripts on recognised bourses is clear, primarily STT.
Regards,
sir,
i have sold a property during Nov 2013 and made the capital gain of rs. 43.50 lacs.
01. what will be the a) last date for making payment of capital gain tax to govt and b) capital gain tax amount.c) How and where to pay tax amount
02. Meanwhile, I have deposited the amount in nationalised bank with the intention of purchase of site from a housing society (who assured me to get it registered within 3 years and construct a house on that site within 3 years. If it materialized, can i apply to I.T. Dept for returning of so paid captial gain tax amount in future AY
pl advise in this regard.
regards
karigowda udupa
Dear Sir,
Whether sale of right to flat against allotment letter is same as sale of a registered flat? I’d booked a flat 3 years back and the buiilder has not yet given me the possession as it is still under construction. At this moment I am planning to sell the flat. So presently the flat is not registered in my name but the allotment letter is giving me a right to own this flat, which I am extinguishing in favour of the buyer in consideration of money. Now if i am selling the flat at this stage whether I will get exemption under section 54 or 54F, if I reinvest in another flat within the stipulated period?
Dear Karigowda,
It will be good if you take consultation of a CA in this matter.
Hi Gaurav,
As per my info if you sell the flat during construction period the long term capital gains will be calculated form the date of agreement with your builder i..e when you purchase the right. So you should be able to claim benefit under Sec 54 if three years have elapsed.
But do consult a CA also.
hi sir my ques is weather a new residential house (new asset) purchased to avail exemption of the long term capital gain u/s 54F can be let out in 3 years of its purchase. please tell me :-
a) can be it let out ?
b) can be it sold within 3 years of its purchase without losing the benefit of exemption is availed?
please reply as soon as posible sir …
Dear Sir,
We are two brothers.My father registered his property(land) on my name alone before his death. I sold this property for Rs 73 lakhs on 23.01.2014. I paid Rs 36.50 lac to my brother through cheque with Rs20 stamp paper receipt settlement.
How to get Tax exemption for this?
Pls clarify
Navjout,
One of the primary condition of availing LTCG tax exemption under Sec 54/54F is that the new house purchased should be held at least for three years. So you cannot sell it within this period.
However, you can let it out and earn rental income from the property.
Mathimaran,
Tax exemption on Long term Capital Gains can only be availed for some specified investments. There is no exemption for giving money to your relatives.
A ancestral property is being sold, it is in my fathers name, and he has already expired, so under dispute. Now selling the same and I need to know how to save tax on the same.
1) can I take the proceeds in my mothers name (Senior Citizen), and then distribute between brothers
2) Individual brothers directly take the share as a inherited amount, and what would be the tax liability
Regards
Dear Sir,
I have sold commercial land for which LTCG is 31.00 Lacs. I have two residential Plots (Land Only) in my name. Can i claim exemption u/s 54F by purchasing new residential flat ? If answer would differ if i purchase new flat in the joint name with my husband ?
Respected Sir,
Please suggest –
1. Re-investment of long term capital gain from an under construction builder flat to another under construction builder flat is exempt from Income Tax or it is neccesary to get it registered ?
2. Whether renovation cost on a registered flat (where re-invetment is done) can also be included in re-investment cost ?
Thanks
Hari,
1. Taking proceeds in mother name and then distributing among children’s does not exempt from capital gains tax.
2. The calculation of capital gains will be separately done by each of the brothers because each brother is assessed to income-tax separately,especially because he is a co-owner. The share you receive will treated as selling price if you do not buy or construct any other property. You can save capital gains tax by investing in Capital Gains Bonds or property.
Take help of a CA to calculate the exact amount of gains of each individual.
Mr. Hari,
As per the inadequate information provided by you, its assumed that your father died intestate. Secondly you’ve not stated that whether your mother was joint holder of the property & that the title passes on to your mother with 100% share & interest in the said property.
Who is the owner of the property under dispute? Important!
1] If the mother is rightful owner — you have no title in the said property – she is required to comply with LTCG not you as you have no title to the said property. [if so you have not defined it.]
2] Dispute you’ve not stated. Has bearing. If the mother wants to sell the property having rightful title, legally nothing can prevent her from selling as per her own wishes.
3] Individual brothers heir apparent to deceased fathers property but on death if the title has passed on to his wife – in this case your mother as being owner, yours & others inheritance rights ceases.
In the event your mother is not a singular owner, apart from resolving dispute, LTCG will not arise as of now, all will have to get the property transferred in their joint names with probate from the court & thereafter immediate sell, ancestral holding counted, LTCG as per individual share in the property.
Regards,
Disclaimer : The above should not be construed as legal / tax advise OR for that matter as expert an opinion.
sir, one have residential house property in joint name and taken loan for the same. he have sold non residential long term capital asset.
1. now he want to invest capital gain in new house property. whether he can take exemption of capital gain u/s 54F?
2. can he use sales consideration of above assets for repayment of loan on residential house property.
Sir,
I have sold the residential property and want to purchase another residential property in the name of my brother from the sale proceeds received from my sale.
Am I eligible to claim an exemption u/s.54?
Pooja,
Not very sure on this as the act speaks about purchasing new property. In my view it should be related to residential property since you avail exemption on the same. You should seek advise of a CA on this matter.
But in case it is not allowed then buying jointly with your husband won’t have any impact on the rule.
Vishal,
1. Primary condition for investing LTCG in a new underconstruction property is that the construction should gets completed within three years from the date of transfer of previous one. Now the new construction of house should be on your name and not on any other person. If these conditions are met you will get the exemption. On necessity of registration of property you should check with a tax expert.
2. Renovation cost will not be included in Re-investment cost if the source of funds is not LTCG.
Pratik,
If you invest the proceeds of old property in the name of your brother you won’t be able to avail the exemption. One of the primary condition for availing this benefit is that the the investment in the house property should be in the name of the person who is deriving Capital Gain.
My paternal grandfather owns a flat in Bhopal (MP) and a plot in Faridabad. He is building a three-storied house on the Faridabad plot with the intention of giving one floor to each of his three children, including my father. My father proposes to partly fund the construction of the Faridabad house by purchasing the Bhopal flat from my grandfather, with funds that he (my father) has already raised by selling a plot of land that he (my father) owned in Bhopal.
This is the plan (as of now two events have occurred — the Faridabad house is under construction and my father’s Bhopal plot has been sold).
Can you suggest the best way of structuring this transaction to minimize the tax liability / stamp duty (for e.g. should my father fund the Faridabad construction by purchasing the Bhopal flat, or would it be advisable for my grandfather to gift / Will that flat to him?).
Sir,
I have purchased a plot in 2007. In 2012 I have purchased a Flat by taking home loan. Now I am getting good price of the plot purchased in 2007. I am planing to sale the plot and with that money I can repay the home loan. If I do this then whether I have to pay any LTCG tax?
Please guide me.
P.Jakir
Exemption of LTCG is available when you utilized within one year before or 2 years after the date of transfer. So If you have bought a house on loan within one year from the date of selling your plot and you sell property to repay this loan, then you should be able to claim exemption. But if more than one year has elapsed since you bought the house the exemption for LTCG tax won’t be available.
Do consult a Tax Professional also for your specific query.
Dear Mr Solanki,
I am planning to sell my commercial showroom/shop.
And will be re-investing it in a residential property. Will there be an exemption from LTCG?
Regards
Gourav
Pooja,
1. One of the condition under section 54F is that you cant hold only one property other than the property you invest on the date of transfer of sold property. So i believe he should be able to get the exemption. Still take view of a good tax expert.
2. Exemption on repayment of loan can only be availed if the property was bought in the last one year of date of transfer. Not aware of how joint property is treated for exemption.
Hi Ankit,
If any immovable property is received through Will then there is no cost involved like stamp duty or tax. But a Will is executed only on Death. Gifting the property through a gift deed may not have tax implication but your father will still have to bear the stamp duty tax since there will be transfer.
You should take the help of a tax expert for your situation.
Hi Gaurav,
LTCG on assets other than Residential house can be claimed under section 54F.
Greetings!
We are NRIs settled in the US. We now wish to sell off our home in India and would like to invest the entire amount in buying a home in the US. This will be our first home there. Is it possible to remit the entire proceeds which would amount to about $130,000 and what are the taxes or other such expense we may incur.
Many thanks,
Thomas
Dear Sir,
Property in name of my grandfather has been inherited by me and all other heirs to property have surrendered their rights in favor of me. The property was purchased my my grand father way back in 1952 kindly throw some light on LTCG on it.
vineet
Thomas,
A far as I am aware, for NRIs-
If the property was purchased through forex then repatriation of sale proceeds is permitted to the extent of amount paid for acquisition of property in forex. The balance amount, if any, needs to be credited to NRO account and can be remitted under US$ one million facility per calender year, after paying the required taxes from sale proceeds.
However, if the property was received through inheritance or settlement or purchased in Indian Rupees, then it will fall under US$ one million facility from NRO account per calender year, after paying required taxes from sale proceeds. You can now transfer these funds directly from NRO to NRE account also, within this ceiling.
Do note that these are my views. You should consult a good tax expert for a detailed clarification.
Dear Mr. Jitendra P.S Solanki,
In case of Ms.Nancy, TRC will also be required apart from other
holding details.
Buyer will be be required to deduct 1% of agreement value & deposit the same with IT in his PAN. Hence the question arises of claiming 1%. Irrespective of TRC 1% deduction is mandatory.
Expect Ms.Nancy takes note of this.
Regards,
Thanks for the input, Mr Joshi
Mr Solanki,
As mentioned above , I am selling a commercial property.
In order to receive a tax benefit , should I re-invest in a commercial property or a residential property.
Presently , I am holding one residential premises.
Regards
Gourav
Gaurav,
You do not get any exemption by investing in a commercial property. It has to be invested in a residential property or other options like Capital Gains Bonds.
Vineet,
At present, there is no tax on inheritance in India.But when you sell the inherited properties, you would be liable to pay income-tax on the gains earned by you on the sale.
Thank You Solankji
Thank You Solankiji
Hi,
By August 2013 my father sold the inherited property and with the capital gains we just did a fixed deposit on my father and mother’s name what i heard from section 54 i can buy a residential house within 2 years so i need to worry anything about Mar 2014 IT return ? or else i can just buy the house by August 2015 do the IT return on Mar 2016 .
Thanks
Kiran
Kiran,
The rule says that if you are not utilizing capital gains immediately then you need to deposit it in Capital Gains Account Scheme to exempt it from tax. This has to done before the deadline for filing the return .The deposited money can be used only to buy or construct a residential house within the prescribed time frame. If you fail to do so it will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first property..
So if i decided to buy a plot and construct the house. Say after buying a plot if i left with X lakhs which i intended to construct i need to put into CAGS ?
Thanks
Kiran
You cannot buy a plot with Long Term Capital Gains. There is no exemption allowed on it. The exemption is only on buying or construction of the residential house. Yes, whatever LTCG remains unutilized, whether fully or partially, it has to be deposited only in CGS scheme of Nationalised Bank.
sorry not to mention i am buying the plot to construct a house
Thanks
Kiran
Dear sir,
in long term capital gain my qustion are as under
1, from date of sale of vecant plot how much time purchaging the ready house/flat and how much time for plot purchaging time and due date when compliting the construction work? time frame ?
2. if i purchage vacant plot within 2 year from sale of vacant land and then after constuction the house within 1.5 to 2 year is ok ?
Dear sir,
in long term capital gain my qustion are as under
1, from date of sale of vecant plot how much time purchaging the ready house/flat and how much time for plot purchaging time and due date when compliting the construction work? time frame ?
2. if i purchage vacant plot within 2 year from sale of vacant land and then after constuction the house within 1.5 to 2 year is ok ?OR AFTER TWO YEAR FROM SALE CONSTRUCTION IS NOT COMPLETADE OF SOME WORK IS REMANING WHAT CAN I DO ?? IN SHORT WHAT IS RULE OF WITHIN THREE YEAR ?
Dear Jitesh
For purchasing a ready built flat or house, it should be completed within two years from the date of sale. However, for purchase of plot and construction of house the time limit is three years from the date of sale. Plot can be bought within one year or two years but construction must be completed within three years. Some work may be incomplete, but the amount required to be invested for claiming exemption must have been utilised before the time limit of three years.
Thanks Mr. Adinarayana for answering the query.
Hi Kiran,
You can claim exemption if the plot is specifically for construction of house. Refer to the query below which has been answered well.
long term capital gain is 50lac under sec54f.residential flat is purchased for70lac out of which 30lac our contribution and40lac as bank loan.Kindly advise impact of capital gain tax exemption
Dear Mr Solanki,
I sold my apartment purchased at a cost of Rs 25 Lacs in 2010 for 30 lacs in 2014. I have since purchased a residential plot for rs 18 lacs within a month of the sale. Does the transaction qualify for any tax relief under Sec 54/54F? If not what would be my tax liability and any means to reduce it? Thanks a ton in anticipation.
Dear Mr. Gupta,
In general under sec 54f you have to invest the entire sale proceeds to get the capital gains exemptions for the full amount of gains. If not so, then you get the exemption in same proportion in which the cost of the new house bears to net sale consideration. The calculation is on the basis of formula used in the article.
However, since part of the funds you have utilized are borrowed, its difficult for me to answer your query. There is a Kerela High court rulings which have disallowed such exemption stating that “Although it is not necessary that the same sale proceeds of the capital assets shall be used to purchase the residential house, the equivalent funds (not borrowed money) should be available with the assessee to purchase the residential house.” But there are other cases where it has been interpreted differently. So it would be beneficial if you seek the help of CA who would be able to guide you appropriately.
Dear Mr. Michael,
First you need to asses the long term capital gains. You can refer my article to calculate your gains.
http://www.moneycontrol.com/news/mf-experts/understanding-long-termshort-term-capital-gains_715289.html
The Cost Inflation index for 2010-2011 and 2013-2014 are 711 and 939. If I take these figures then you are actually having capital loss as the cost of purchase will inflate to more than the selling price. So your tax liability will be nil in that case. But the actual calculation will be based on which financial year you purchased in 2010.
You can asses it by taking actual date of purchase and selling and the respective Cost Inflation index for the financial year.
Dear Mr Solanki,
Thank you for such a prompt reply. I have gone through your article as well. The possession of the flat was handed over in April 2010 and it was sold in Feb 2014. So the relative figures should be 2010-11 at 711 and 2013 -14 at 939. Would that be correct?
Dear Mr.Michael,
Yes that will be correct.
Section 54: Old Asset: Residential Property, New Asset: Residential Property
Can we consider Vat & Service tax amount as cost of acquisition of new house property ?
We are four sisters having a site of 4800 sq feet ( cost of purchase of site was Rs.320000, purchased on 10-12-2000 ) jointly in Bangalore. We gave the property to joint venture and in return of site we each got one flat in an apartment. (Market price of 4 flats now is 80 Lakhs)
We have made a partition deed and one flat has been in my name and it has been given to rent.
I do own 50% share in existing house where i reside from past 25 years.
Now my question is if I should pay the capital gains now or at the time i sell the flat.
Please help me to save capital gains.
Regards
Ramya
I sold my agricultural land.Out of the sale proceeds,I set aside a certain amount for purchase of a builders flat in Gurgaon,under provisions of Sec 54 F.I also opened a separate bank account under Sec 54F,with that set aside amount to pay for the installments for the said flat.Now this big time builder has defaulted w.r.t timely completion of the flat,as against the promised 3 years, he has still not handed over/completed the flat/tower even after 9 years from the booking date.During this period I have paid the builder the full amount,as set aside for Tax exemption under Sec 54F.My case has now come under the ITO’s scrutney and I am being asked as to why the possession letter has not been provided to them as yet,well over the 3 years specified timeframe.What is my fault here?Can you tell me if the Govt./ IT authorities have given any grace in such cases.The builder quotes the international recession as a reason, late FDI permission by the Govt etc.Looking forward to a quick response from your end.
Mahesh,
In general Service Tax and Vat should be included in the cost of acquisition of old property when you are calculating your capital gains.However, I am not too clear on the new property as it has been few years when Service Tax is implemented. Good to take help of a CA.
Suman,
I am not a tax expert so will not be able to advise on your case.But I was going through few court cases and below is a recent one where High Court and Tax Tribunal took a decision. The case runs similarity to your situation and may answer your query-
http://www.jitendrapssolanki.com/wp-content/uploads/2014/03/Sec-54-F-recent-case.pdf
Hope this reference helps.
Take the help of a tax or legal expert who will be able to advise you more appropriately to answer Income Tax Queries.
Ramya,
In general, gains arising from transfer, exchange or relinquishment of a capital asset are subject to capital gains tax. The date on which the sale/transfer takes place is when capital gain arises. So in my view your capital gains will arise the day you get the possession of new house. The amount of capital gains ill be as per what you have received in the replacement.
But there are more legalities involved in such transactions for deriving the capital gains. So do take assistance from a competent lawyer.
Dear Sir,
We are going to sell our ancestral house(we are just giving our possession rights as we aren’t the owner of the house).
1) How can we save the capital gains tax on the same?
2) The party is ready to give cheques to all the family members.so is there any use in taking so many cheques or should we take just 2 cheques (one for my Dad & other for my uncle)??
3) How will i come to know whether the 54EC Bonds are going to be applicable for 2014-15 as well?? Is it a compulsory thing to do for the government to come out with REC & NHAI bonds every year??
Thanks & Regards,
Chetan
Mr.Chetan,
Who is the owner of the said ancestral house? Property?
Are you a tenant?
Regards,
Dear Vinay,
The owner of the property has sold their rights to the developer. My family is staying there since nearly 100 yrs now. My great grandfather had built the house but as he fell short of money he took a loan from someone and inturn transferred the property to their name. We never paid any rent but we regularly paid the Gharpatti(Gram Panchayat Taxes) for the house.
So kindly help.
Regards,
Chetan
Sir,
Thanks for the reply. Here i am writing the detail of our property.
We had given our vacant site to joint venture on 21-october-2011 and I got one flat in an an apartment on 30-november-2012. (the site was purchased on 10-02-2000)
Can we claim capital gains exemption under section 54 and 54 F of Income tax.
Can the exemption also be claimed if the house is given for rent.
I have one home in which i am residing and i don’t have any other property in my name.
Please help regarding the matter.
Sir,
Thanks for the reply. Here i am writing the detail of our property.
We had given our vacant site to joint venture on 21-october-2011 and I got one flat in an an apartment on 30-november-2012. (the site was purchased on 10-02-2000)
Can we claim capital gains exemption under section 54 and 54 F of Income tax.
Can the exemption also be claimed if the house is given for rent.
I have one home in which i am residing and i don’t have any other property in my name.
Please help regarding the matter.
Sir,
You mention that the residential house purchased under section 54F can be rented out. Can you please clarify this against sub-section 1 (b) of section 54f which I am reproducing here:
[Provided that nothing contained in this sub-section shall apply where—
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.]
Thank you.
Regards
Kartik
Mr.Chetan,
Noted with due diligence the aspects put up by you.
It’s apparent you are not the owner of the property.
For LTCG in which manner you’ll establish your compensation?
It’s advised by me you should consult your tax expert as certain legal intricacies are involved. Fine point is ‘developer party’, giving compensation – under which provisions? That should should be the aspect for LTCG! As per the agreement.
Regards,
Dear Vinay Sir,
Though we aren’t the owners of the house, we are having the control of the same since last 100 years. We are just selling our possession rights (as in case of a tenant) to the developer. If that doesn’t come under LTCG then what would the profit arising from the same be termed as????
The thing which i want to know is that whether the 54EC bonds do come every year?? I mean is it mandatory from the government side or whether it depends on whether REC & NHAI are in need of money??
If yes then by what date can i expect an advertisement for the bonds for 2014-15.
Regards,
Chetan
Kartik,
There are few conditions to be fulfilled for exemption under sec 54 F:-
(i) The assessee should be an individual or a Hindu Undivided Family (HUF).
(ii) The asset transferred should be any long-term capital asset but other than a residential house.
(iii) The assessee should have purchased, within one year before the date of transfer or two years after the date of transfer or constructed within three years after the date of transfer (or from the date of receipt of compensation in the case of compulsory acquisition), a residential house (hereinafter referred to as “new house”).
(iv) The assessee should not have sold or transferred the new house within three years of its purchase or construction.
(v) The assessee should not own on the date of transfer of the original asset more than one residential house (other than the new house). He should also not purchase within a period of one year after such date or construct within a period of three years after such date any residential house whose income is taxable under the head “Income from House property”(other than the new house).
(vi) The assessee also has the option of depositing this amount in Capital Gains Account Scheme as explained in section 54 above, before the due date of furnishing the Income-tax return.
So point no V should be the interpretation of the section you are mentioning. Still i haven’t come across any case where exemption is denied if property is let out. In my view giving property on rent is not a constraint for sec 54 or 54F exemption.
However, verify from a tax expert for arriving to any conclusion. My comments are within my understanding of these sections.
Hello Mr. Chetan,
My last post was explicit in the matter in every aspect.
Regards,
SIR,
MY QUESTION IS REGARDING LAND……
ONE OF MY CLIENT PURCHASED LAND AT RS. 6 LAC N SALE IT AFTER 3 YEARS AT RS. 2.43 CRORES.
NOW THE ASSESSEE INVEST THE FULL AMOUNT INTO ANOTHER LAND…
NOW THE PARTY DECIDE TO DEVELOP THE LAND BY PLOTTING ON IT IN PARTNERSHIP FIRM…
NOW WHAT IS THE TAX EFFECT >
SHOULD PARTY CLAIM EXEMPTION IN ANY SECTION FOR LONG TERM CAPITAL GAIN OR CAN CLAIM DEDUCTION OF THE OTHER LAND PURCHASED BY HIM ?
Rinkesh,
Firstly, you cannot avail long term capital gains tax exemption by investing in land. It has to be utilized only for a residential house. If you have bought land for construction of residential house and complete it within time you will be able to avail the exemption.
Second issue is the ownership. If your client was a complete owner of the previous property, then the capital gains taxation liability rest on him. In such instance the new house has to be in his ownership. In my view, he will not avail exemption if the new ownership is different from the previous.
Lastly, this is sec 54F benefit. A per rule you cannot own more than one house on which you are claiming exemption. Only if multiple houses are utilized or converted into a single unit the exemption will be applicable. However, this type of situation is debatable and you can refer to court rulings here:
http://www.jitendrapssolanki.com/wp-content/uploads/2014/01/Recent-Judgements.pdf
These are my views. For a detailed discussion you should consult a tax expert/lawyer who will be able to guide you on the legalities involved.
Dear Mr.Solanki,
I have 3 residential flats out of which 1 in my name only and the other 2 in joint names with my wife and son. I plan to sell the flat which is only in my name (Purchased in 1986). After selling the flat I wish to purchase a new residential flat of the same or more value.
I have the following queries:-
1) Will I be exempted from tax under Sec 54
2) Can I purchase a commercial property instead and still be eligible for exemption under Sec 54
3) Will I get a benefit of 1986 indexation in case I don’t be eligible for exemption under Sec 54
4) Can I rent out the flat which I purchase immediately and show rent in my income and pay tax on the same.
5) Can I gift the flat to my son since he has only 1 flat in joint names and then he sells the flat later in a month.
Thanking you in advance.
Dr.Jigar Gala
Dr.Jigar Gala
Dr. Jigar Gala,
You can sell the flat but to avail 54 you can’t invest it ‘into commercial property’. If you invest the entire sale value in resi. flat, need not bother of 54 at all. This concludes your first two queries.
There is no such thing as indexation of 1986, ’86 purchase value as per 2014 indexation you’re eligible under 54, LTCG investment, not otherwise.
As regards your pt. 4&5, yes you can rent out the flat, can gift the flat to the son, irrespective of the no. of flats he holds. He can sell it later month, it will attract STCG.
Regards,
Thank you very much for your comments. However my chartered accountant told me that it could be debatable since I have 2 flats and will be buying the third flat after selling the 3rd flat I already have, I will not fall under tax exemption as section 54 does not state exemption for more that one residential flat.
Please comment and advice.
However as per your comments and advice you feel that in case i sell one flat out of three and purchase a flat in one year time, I will not have to pay any long term capital gain tax?
Dear Mr Solanki
I sold my residential plot ;(on which we had made no construction) and was in joint name of my mother and myself; after 8+ years and am now purchasing a flat (in the same joint name) from the sale amount. Please clarify if I would be illegible for the Indexation benefit from the sale of the plot or would I have to invest the entire amount received from the sale of the plot towards purchase of the flat.
Dr.Jigar Gala,
Tax Exemption on The Long Term Capital Gains from Residential House falls under the preview of Section 54. Under this section, there is no restriction on number of properties you are holding on the date of transfer of the previous asset. The condition of not more than one residential property apart from the exempted house is under section 54F where LTCG from assets other than residential are included . So in my view you should be able to avail the exemption under sec 54 by investing the proceeds in a residential house.
You can consult other CAs for your benefit.
Dear sir ,
Please guide me in following matter.
Following are the facts of the case
1) land purchase in joint name in june 2011 (wives of both brother)
2) started construction of own house in may 2012 and expected to be completed in December 2014 or January 2015.
3) sale long term capital asset in march 2014.
My question is whether assessee can take the benefit of Section 54F of Capital gain.
Because
1) One of the condition of Section 54f is to complete the construction within 3 years after the transfer of long term capital asset takes place.
but in my case construction already started before 2 years and expecting to complete within 1 year after the transfer of long term capital asset takes place.
Please sir guide me
Regards
Abhishek
Saksham,
Long term capital gains earned from real estate is taxed at 20% with indexation benefit. There is no other choice here. Investing in other residential house is one of the options for availing the exemption of the tax liability which you have incurred.
Dear Mr Solanki
I do understand that I can claim exemption of the Tax by investing in another residential house but I have received a contrary opinion that since the sale of my residential property was a plot and not a built up house I would not be able to claim the indexation benefit but will have to invest the entire sum received from the sale of the plot in the new house. Please shed light on the same.
Saksham,
In real estate, residential or plot, long term capital gains tax is calculated at 20% with indexation benefit. There are assets where indexation of cost is not allowed such as bonds, debentures etc. But in case of a plot also you claim the indexed cost benefit for deriving the long term capital gains taxability.
The condition of investing the entire sale proceeds in new house is for availing the exemption of the tax under Sec54 in case of gains on assets other than residential house.But here also if you own more than one house on the date of transfer or purchase/construct within 2/3 year other than exempted house, then you will not be eligible for claiming tax exemption.
Hope this helps you in clarifying your situation.
Abhishek,
Exemption u/s 54F may be granted if the construction of house started before the sale of the said house property, provided you have proof of investing the whole amount in the construction of your house. In my view this relaxation is applicable only for within one year before sale of asset. Since you started construction two years before, you may not get the exemption.
However, this is my interpretation and you should take view of a good tax expert to clarify.
dear sir,
The commencement of construction appears to be of no consequence.
Its the completion of construction to be not before one year prior to date of sale of original asset from which cap-gain has taken place.
Pl check.
Samant,
Yes. The case of CIT v J.R. Subramanya Bhat (1985) 165 ITR (Karnataka), the court ruled that the construction can start before the transfer date but should be completed only after the selling of previous asset. The court observed that “It was immaterial when the construction commenced, the sole and important consideration as per the Section was that the construction should be completed within the specified period.”
Although the case pertains to sec 54, the interpretation should be for both the sections.
@Abhishek,
With reference to the case of CIT v J.R. Subramanya Bhat (1985) 165 ITR (Karnataka), the construction can start well before the date of selling your asset but should get completed after it. So as per the court ruling you should be able to get the exemption.
Still, take a view from a good tax expert.
Sir,
I have a vacant land with in city limits (possession since 2010) and a residential house outside city limits (inherited, original owner possession since 1993). I want to sell both of them and buy a residential flat out of the proceeds. I plan to put the money in CGS account till I finalize the new property. My questions are:
1. Should I open two different CGS accounts for depositing the proceeds as one falls under 54 and other under 54 F
2. Can I claim exemption from both the accounts for buying the flat?
Please note that I do not have any other residential house / property. In short, I’m consolidating the LTCG from both the properties to invest in a single residential unit. Is it permissible or is the exemption available only for LTCG from residential house?
Mr. V. Krishnan,
Your pt.1 – yes you’ll have to establish two different a/cs. [banks require the agreement to determine it, they will not establish it in the first place.]
Your pt.2 – combining 54 & 54F LTCG into one property certain aspects are there.
54F[d][ii] – how you’ll how you’ll comply? 54 clear an aspect.
It states that ‘that if the cost of new asset is less than the net consideration of the original asset [in this case YOUR LAND], so much of the capital gain as bears to whole of capital gain the same proportion as the cost of new asset bears to the net consideration, shall not be charged u/s 45.
However it is advised that you consult legal & tax expert. [there are certain possibilities.]
Regards,
Disclaimer : The above should not be construed as legal / tax advice OR for that matter as expert an opinion.
Dear Sir,
I’m holding one residential flat. And now I’m selling my commercial property and I want to avail benefit u/s 54F by purchasing another residential flat. Can I get the exemption u/s 54F?
Nishit,
Sec 54F rules states that you should not be owning any other residential house apart from the exempted one. In my view you would not be able to avail the exemption since you already owns a residential house.
If two residential properties are sold then can the sale proceeds of both be utilised for purchase of another property(one property)to avoid capital gains from both the properties.
Sir,
Can u give me the relevant case law on the following case
LTCG on 01/08/2011
Less: Deduction U/s 54B
and invested in capital gain account for the same
and not utilized the same till now
so i want to ask that same amount can be claim in 54F as deduction
Govindrajan,
Not sure on the clubbing aspect whether income tax allows it. However, there is a case of Rajesh Kashev Pillai where Income Tax Tribunal has taken a view that as per the rule of sec 54 there is No restrictions on the number of property sold to claim exemption but Only one property can be bought against each claim.
Take the assistance of a CA as your case requires a good understanding of the rule of this section.
Rachit,
As per section 54B of the Income Tax Act, 1961, in case the property sold was used for agricultural purposes only, for at least 2 years before the date of its sale, the long term capital gains arising from the same will have to be used for purchase of another agricultural land only within 2 years from the date of sale of original property in order to avail capital gains exemption on the same.
So in my view if it falls under Sec 54B you cannot claim exemption under Sec 54F. You can read about the case in Punjab and Haryana High Court in the case of CIT v. Gurnam Singh 327 ITR 278. The Income Tax Tribunal and High Court has allowed the exemption under sec 54B only on the fact that the gains are not utilized for buying other than agricultural land.
For more clarification, you can take help of a good CA.
I SOLD AG. LAND OF URBAN AREA AND PURCHASED RESIDENTIAL HOUSE OF PART AMOUNT AND INVESTED PART AMOUNT IN CAPITAL GAIN BOND WHETHER EXEMPTION WOULD BE AVAILABLE FOR BOTH SECTION U/S 54 EC AND 54 F
Hi,
Interest received on REC Capital Gain Bonds — Is taxable on receipt basis or accrual basis?
Thanks
My father in law expired 10 years ago.He had 3 sons including my husband who also expired 7 years back.We sold our 40 years old property inherited from my father in law.The amount was distributed amongst three of us.I don’t have any papers like old sale deed or new sale deed but that much I know that the new sale deed has our names mentioned i.e. me and both my elder brothers in law’s with pan card nos as sellers.Do I really need the photocopy of all the above mentioned papers for further query or use?As we are not really in good talking terms I feel hesitant asking for them.
My question is that, how do I have to take care of long term capital gain tax. Do I have to bother about my tax only? In the capital gain account do I have to keep the entire amount or only the calculated capital gain tax.
What if my brothers in law are not doing anything to save taxes.Should I be bothered about all this or go for capital gain exemption for me only. In the sale deed even the DD nos are also mentioned.
Early reply is really appreciated.
Pradeep,
The exemption for investment in residential property is available for Sec 54 & 54B which is for residential and other properties.
Any exemption on gains from agricultural land (Urban) is available under sec 54 B and as per its provision the gains has to be invested again in an agricultural land. In my view your exemption in residential property may not qualify.
However, urban agri land is a capital asset and so the exemptions must be available under Capital Gains Bonds. So you may be able to claim exemptions for this portion of your invested gain.
But these are my views and the income tax provisions need to be understand with reference to any past tribunal/court rulings, you should do seek the assistance from a qualified tax expert.
Our agricultural land was acquired by Government of India for Power Project and in turn my father received an amount of Rs.10 lacs. This land was purchased by my grandfather may be 60 to 70 years back.
What is the tax treatment for it ?
sir
i have a plot with a house which i got from a will from my mother after her death in nov 1989. now the property is in my name.The plot was purchased in 1955 for rs. 2500.A portion of it has gone to my sister.Now i want to demolish the house and sell a portion of the plot which may fetch me 1.6 crores.i have another house inthe same plot.Now if i sell a portion of the plot and build a house in another portion of the plot and with the remaining money can i buy residential plots and keep them for long time. What will be my comitmets for tax and on which account i have to deposit the sale proceedings till i spend within 3 years of sale of the plot
MY ANCENSTRAL PROPERTY 80000 SQ FT GIVEN FOR JV AND I HAVE RECIVED 90000 LAC AS A DEPOSIT .AND I WILL COME 60000 SQ FT SALEBLE CONSTRUCTED AREA AFTER FOUR YEAR KNOW HOW CAN CALCULATE MY LTCG, HOW CAN I INVEST MY MONEY FOR EXEMPTION U/S 54, 54F AND AFTER SELLING MY 60000 SQ FT CONSTRUCTED AREA HOW CAN CALCULATE MY TAX LIABILITIES, PLEASE SUGGEST ME IN MY FAMILLY FOUR PERSONE MOTHER, FATHER, BROTHER AND ME. PLEASE SUGGEST ME. I AM RESIDENT IN PUNE.
Chinu,
The tax liability in your ancestral property will arise on three of you in your respective share. So you will have to pay tax on your respective share and your brother in law on their share of gains. I don’t think you should be bothered about your brother in law tax liability as they own it.
Now or deriving your share of long term capital gains there is a defined process of taking the cost of purchase and then indexing it. You will have to calculate on the total property and then divide by 3 to get your share of gains. For this you might require property papers to know the exact date of purchase.
With respect to exemption on your gains you can use options available under sec 54 or 54f, as per property sold. If it was residential property then you need to invest only the gains.
Lastly, your brother-in-law gains should not be a concern for you.
All said, you should seek assistance of a lawyer and a CA to know the exact position about documents required and calculation of gains. I have given an opinion but cannot answer you on the legalities as it is beyond my expertise.
Mr.Nana Namdeo Tapkir,
You have finalized a JV for development of 7,400 sq.mtr [approx] with rights for sale of 5,500+ sq.mtr [approx] & YOU ARE GETTING DEPOSIT OF 900 CRORES – [90,000 lacs]!?
No details are stated & WHY DEVELOPER DEPOSITED 900 CRORES WITH YOU? FOR WHAT?
WHEN YOU FINALIZED THE DEAL OF 1K+CR – YOU HAD NO ADVISERS!?
YOU’RE SEEKING PORTAL SUGGESTIONS!?
This portal can definitely advise if you scan & send all documents to Mr.Jitendra P.S Solanki.
HNI, seeks portal suggestion!
Regards,
Mr.Jitendra P.S Solanki,
You have explained the aspects to Chinu.
I wish to add to your stmnt, 1% TDS will be there by the buyer.
It’s not clear the cheque/draft was recd by the first named in or by two brothers & consideration distributed [given to Chinu] or three separate payments by the buyer.
Irrespective for any step towards LTCG exemption, calculation, investment certified registered copies of purchase deed & sale deed must.
Regards,
Nana Tapkir,
As Mr. Vinay Joshi highlighted, the data given by you is huge and not having any adviser is a doubtful scenario.
Kindly elaborate your query or else correct the figures if typed wrongly.
Sanjiv,
In my view, Agricultural Land in rural areas (where it is used only for agriculture) is not treated as a capital assets and so they do not fall under preview of capital gains. Hence there is no capital gains taxation.
However, there are conditions laid down by IT on what can be defined as agricultural land, which you should verify from a CA.
Mr.Vinay,
Thanks for your valuable input.
K shehadri,
Firstly since your gains will be from a plot so they will come under Sec 54F. To get the exemption in this section there are certain rules to be met- one of which is that you should not be having another residential house apart from the new one you construct or purchase. If you have then it will be difficult to claim exemption. If your gains would have been from selling a residential property then owning number of houses would not have been a problem. So you need to check on this condition from a CA before you make a decision.
For your other query, In both sec 54 & 54F exemption till you are not utilizing the funds it need to be deposited in The Capital Gains Account Scheme (CGAS) of a Nationalized Bank.
sir
Thank u for ur reply.Now i have some doubts regarding 2nd house.
as i m demolishing a portion of the house and selling that will it come under that i have a house and if i construct a house or develop the present house with a new house will it come under 2nd house.In general i cannot claim capital gains if i have more than 2 houses including the new one.
Also pl clarify whether i can buy plots for me or my legal heirs to avoid tax.But these plots will be kept for long time before selling or building houses.
Or if i sell the house without demolishing it can i build a 2nd house
Dear Mr.Solanki,
My grandfather had Purchased a flat under a capital gain and he had registered my name as a co – owner of the same. The property was purchased in the Yr 20010. He passed away in the yr 2011. The flat is still under construction. If i sale the flat now, would i be liable for any Tax & by what % of capital gain.
Since the property purchased was under capital gain, am i liable for any tax exemption.
Regards,
Devendra.
K Seshadri,
Its a tricky question and i may not have a complete answer as I am not a tax expert. Still i will give my views..
If your gains are under Sec 54F, i.e. only from a plot, then you should have only one house and that is on which you are taking exemptions. If you have more then exemption may be denied. Now on selling part of your house i don’t have much clarity and its advisable that you seek clarification from a good tax expert.
As for buying a plot in Sec54 or Sec 54F for tax exemptions, it is not permissible.You can only buy or construct a residential house.However, if you buy it for constructing a house then it should be completed within three years else you will not be able to claim exemption.
I hope this answers some of your doubts. Good to consult a tax expert on your situation since there are many legalities involved.
Dear Sir,
I’m disposing of my existing residential flat (in joint name with my wife) to buy a bigger flat. I don’t own any other residential house at this stage. I also plan to sell my gold jewellery to partly fund my new house. Some of this jewellery was gifted to me on my marriage and other occasions and some was acquired / purchased by me over the years.
Can I claim exemption under 54 (on existing flat) and 54F (on jewellery) on purchase of new flat? I intend to own it in joint name with my wife.
Your inputs will be really appreciated.
Regards,
Gagan
Mr. Gagan,
Do not mix up sec 54 & allied secs of immovable property.
No point in discussing sale of jewelry.
Regards,
One basic question for benefit of people at large.
Who determines Market price of House Property in year 1981-82. This is a very basic query as most properties Inherited and Sold cum under this category. There is windfall surplus as real estate prices have gone up substantially in past 10 years.The seller has to pay high taxes due to this.
Lets say a property is sold in May 2014 for 5 crores , is assessee free to take cost as 25 lacs in 1981 , thereby get indexed cost to approx 250 lacs and pay tax on the Capital Gains arrived at ?? Is there any formula to work out cost of property
35 years ago.
secondly , lets say capital gains is 250 lacs as mentioned above. The assessee does not wish to pay tax nor buy Property. There is a limit of 50 lacs for BONDS. In that case , can he claim exemption by opting for Fixed deposit in capital gains scheme .Same lock in period as in case of Bonds. He wont withdraw proceeds for 3 years
thanks.
Can a person pay 10 % LTCG tax on sale of Immoveable property .
House bought in 1981 for 1.1 lac
Sale price is 100 lacs
Indexed cost is 10.00 lacs
profit is 90 lacs
20 % tax is 18 lacs
10 % tax without indexation is only 9.9 lacs ( 100 lacs less 1.1 lacs )
kindly reply asap
Mr.Prasad,
Pl understand LTCG. No provision of 10%, not fulfilled the sec 54 aspects 20.36% taxation.
Regards,
Mr. Piyush,
Your quest is to just to put it up! Nothing concrete!
Yes the respective state govts. all over India with Central Laws have specific laws in place & regulated system to ascertain the immovable property value as on April 1, 1981, with increasing indexation as per union finance ministry, IT schedule. The IT department has norms.
It’s followed in the said valuation with ref to ready reckoner.
Please follow the concept of indexation!
Also understand valuation.
As regards 250 lacs – 100 lacs can be invested in bonds within six months IF & IF first 50l is within 3mnths of end of FY & next 50l within 3mnths of AY, investment as stipulated within 6mnths fulfilled if bonds available!?
Do not mistake bonds lock in with capital gains a/c! CG is for 5yrs tho’ not necessarily it can be freed by 3yrs tho’ norm.
Any tax free bond withdrawal before maturity normally 7yrs, taxable to nullify LTCG & any int recd.
Regards,
Can I sale two residential flats which I am owning more that 4 years and invest in one residential flat. In summary, two flats capital gain tax can be invested in one. Please suggest.
Hi Mr. Jitendra,
I really appreciate your efforts to justify the difference in such simple words, however since every case may sound a bit different I would request you to help me with little more clarity on below –
First residential apt bought in 2002 in self and fathers name(for the sake of keeping a second owner- have his full POA). Planning to sell it in a month and willing to reinvest the capital gains only. This apt is vacant at this time and not self occupied. I am renting in same city closer to work place. I bought another apartment in sep’13 where I have loan pending and I wish to prepay majority of loan amount using above capital gains.
1) Does residential means you must occupy in order to claim capital gains benefits, either first or second apt said above?
2) capital gains calc are clear to me however as my father is also a second owner (all financial transactions for first apt were done by me from my account) can I still claim/use entire proceedings as long as he is ok with it? While the apt was on loan during initial years I was claiming 100% tax benefits.
3) I am carrying forward some LT capital losses. (partial from share sale and partial from another commercial property sale). Can that be adjusted against above capital gains?
I will greatly appreciate your response on above questions to better access my situation.
Thanks,
Rajeev (IIT-R, ’97)
DSR
There has been a previous such case in Mumbai Tribunal where the assessee sold share in multiple properties and capital gains was invested in one single property for exemption. The benefit was denied by AO but Mumbai IT Tribunal upheld the benefit with a view that under sec 54 there is a restriction on investing in one property but no restriction on gains from selling multiple properties. Going by the facts of the case you should be able to claim the exemption.
However, its recommended that you take assistance of a good tax expert.
Dear sir,
Request your views on the following two queries:
1) I have one flat (A) purchased 7 yrs ago and another one (B) purchased 3 months ago on bank loan. If I sell off A and invest the capital gain from sale of A to clear off loan for B, do I need to open CGAS account etc? If not, where to show this adjustment?
2) Immediately after clearing off the loan for B by the proceeds of A, is it permissible to buy another flat C taking bank loan without affecting the exemption on the capital gain of A?
Nishant,
1. For the period your capital gains received remains unutilized it should be deposited in a CGAS account.
2. If the claim is under section 54 i.e. capital gains from residential house then you don’t have any restriction on the number of residential houses you can hold on the date of transfer or within three years from it.
Hope this answers your query. Do seek advice from a qualified tax expert also to verify your case.
Hi,
My mother sold her plot in Dec 2013 for 25 lacs and the sale proceeds were deposited to her savings bank account in Dec 2013. The long term capital gain from this sale is 22 lacs. But currently we haven’t been able to identify a house for purchase. In this case, can we now open a CGAS account and deposit the amount from my mother’s savings account to CGAS account before July 31st, 2014 to avoid tax on LTCG?
I checked with Syndicate Bank, and they told that it is not possible to open a CGAS account now. Instead they tell that the sale proceeds should directly have been deposited in CGAS account in Dec 2013 and it is not possible to now transfer the sale proceeds from savings account to CGAS account. Is this correct?
Thanks in advance.
Rajeev,
Thanks for the appreciation.
1. It’s not necessary that you occupy the house to claim tax benefit.
2.In general you can claim capital gains exemption benefit as per your ownership in the property. So if you are a joint owner you can claim on 50% of the gains and the other owner can claim on his 50% share.This aspect is not related in any manner to housing loan since housing loan benefits you claim as per your share of the loan.
3. LT capital Losses in shares can be adjusted against LT Capital Gains from a house. But i am not sure on setoff of losses from commercial properties against LTCG from residential house. You will have to seek clarity from a tax expert on this.
Dear Sir,
Pls help me with the following details with regards to LTCG:
I purchased a residential plot in August 2009 (date of registration of plot) and gave to builder for construction, which he handed over to me in October 2010. I sold this house in the April 2013. It will be treated for LTCG or STCG. Total Cost of construction is around 29Lakhs. I sold it for Rs.41Lakhs. I paid Rs.80000/- for brokerage.
The above property was financed from LICHFL. The amount I got after selling was paid towards settlement of loans around Rs.25 Lakhs. To LICHFL I had paid interest on loans for three years. What will be my tax liability.
On this capital gain I plan to seek exemption by buying a plot from my mother and doing construction for residential purposes. Can I do that? Can I purchase residential property from my mother?
Thanks for your help
Sanjay Singh
Yogeesh,
Yes its true. Capital gains from house property should be deposited in CGAS accounts if it remains unutilized. Since you deposited in a general savings bank account, the gains will be taxable now.
Dear Sir,
But isn’t it that the unutilized capital gains should be deposited in a CGAS account before 31st July 2014? i.e. as in below link
“http://economictimes.indiatimes.com/save-tax-the-capital-gains-accounts-scheme-advantage/tax-payers-advised-to-take-advantage/slideshow/6150009.cms”
I am a bit confused regarding this. Can you please clarify?
I will also consult a CA regarding the same.
Thanks a lot.
Yogessh,
The interpretation of that clause is that the gains should get deposited in CGAS account before the return filing date in order to gain exemption. But you cannot deposit funds in a normal savings account. If you read the slides of article you have sent you will also find this-
“Whenever you are contemplating to make a deposit in respect of Capital Gains Account Scheme, either by way of a savings account or a fixed deposit account , then please remember that you do not open the normal savings bank account or a normal saving bank deposit but specifically fill up No A and then make the deposit with the concerned bank under the Capital Gains Accounts Scheme.”
Yes do take help of a CA to clarify.
Thanks Jitendra for the clarification.
Was only wondering whether all the formalities of opening CGAS account really required if i invest the capital gain in another house property within 15-20 days.
NB,
CGAS will be mainly required if your time horizon is such that you need to deposit the funds in a bank account. If within 15-20 days you will utilize the funds then you may not have to open a CGAS account. The rule is that it should not get deposited in a normal savings account else you lose the exemption. Whatever capital gains amount remain unutilized should be deposited in a CGAS account before ITR filing date of the respective year to claim IT exemption.
Dear Mr. Solanki,
Firstly, thank you very much for your article and patient replies to the queries. This is one of the best discussions I have come across on this complex topic. I have a query and hope that you will clarify.
My father had an ancestral house that he sold in Oct-2012. We computed the capital gains and deposited the same into the Capital gains account by June 2013 prior to filing the income tax returns.
We now intend to invest the capital gains in purchasing an under-construction apartment being built by a builder. In earlier comments, you have mentioned that this should be fine, as long as the construction is completed within 3 years of the sale of the original property. So, in our case, the new property should be completed by Oct-2015. My doubts are as follows,
1. How does one prove that the construction has completed within 3 years? Is it sufficient, if the builder has specified a completion date before Oct-2015 in our agreement?
2. Would it be acceptable to purchase an apartment, wherein we have payed an amount greater than the capital gains to the builder within 2 years (Oct-2014) but the agreement with the builder states the completion data greater then 3 years (after Oct-2015). Would this scenario satisfy the exemption criterion?
Thank you very much,
Dev
Dev,
Thanks for the appreciation.
This is my view on your queries-
For your first query on date of completion of construction of house, there have been various disputes on this aspect. In general, when you get the control of the property is crucial in deciding when the construction is completed. In many court cases courts have ruled that if assesse has paid substantial installment and obtained substantial control then the exemption under Sec 54 cannot be denied if delayed is from the builders end. Even delayed due to procedural issues have been relaxed for this section. So Its when you obtain the control of the property it will be construed as completion of construction. For this I believe in general getting a possession satisfies the criteria.
For your second query in my view it will not be counted as exemption if before making an agreement you knew the time horizon of completion is more than the stipulated period. It is only when projects were to be completed within the stipulated period but got delayed due to various reasons that the court have given relaxations.
However, do note that these are my views within my understanding of the section. A better clarification you can get from a good tax expert.
Hello Sir
My father purchased a residential house in the year 2000. After his death in 2012, I am selling this house in 2014 but this house was never registered in my name. Will I be eligible to avail the benefit under section 54 if I purchase a new house in my name with the amount received by selling my fathers house.
Query on LTCG exemption under S 54:
A person invested LTCG on sale of his house property in another house property but only for part ownership, say 10 % , or say 33.33 %. Is this LTCG eligible for exemption from tax?
This situation arises now in say metro city like Mumbai, where a flat costs say Rs 3 Crores. Three persons have sold their own houses and invested their LTCG of Rs 1 Crore each in a flat in Mumbai for Rs 3 cr for acquiring part , 1/3 ownership in the flat . Query is whether all 3 parsons will be eligible for LTCG exemption of rs 1 Crore separately in their individual returns or not ?
Please reply.
Nikki,
Being a legal heir you must have inherited the share in the property from your father. You will be able to claim exemption on the capital gains for your share in the property. If you have inherited the entire property you can claim Sec 54 benefit on the entire gains.
Kiran,
There have been few cases where exemption have been granted to property purchased jointly with spouse or children or relatives known to you. There court have considered a soft view of the section stating that it is more for encouraging investments. But I am not very clear on property purchased in part ownership with friends or people unknown to you. I am unable to find any relevant case regarding your structure. In general you should be able to claim the exemption.
You will have to seek assistance of a competent tax expert or a lawyer for your case. This is also due to the fact that in all cases i have come across the Assessing Officer have a much different view from the court or the tribunal. So a good tax expert will be able to guide you appropriately.
Mr. Kiran,
As Mr. Jitendra has pointed out a cautious view, it is in your interest to seek your advisory. Further this portal is just a pathway, positioning, individual cases defer.
However nowhere sec 54 & its sub-sec’s state, read inter alia with any other sec[s] on sale of immovable property, LTCG claim, that 100% LTCG to be invested by the assesses in his/her OWN name ONLY. THAT ASSESSES, SINGULAR OWNER.
With your 33% share in the property [assuming residential] purchased with tripartite ownership agreement can claim LTCG benefits.
FYI, I.Tax laws does not EXPLICITLY mention [sec 54F] that residential house includes a plot – [the cost for LTCG].
CBDT circular states cost of residential house will include cost of land.
I.Tax sec 54 states one can construct one’s house. Right.
The LTCG resulting from your sale of residential property, held for 36mnths, can be claimed by reinvesting. Utilized amount only, bal as per 54. It will be in proportion.
Regards,
Hello Sir, On these sections 54 and 54F:
1. 54F – if I am an NRI and I sell a land. My other property is outside India. Still will it be counted for Capital gains Tax?
2. I have a vacant land. I sell another flat and apply this cash to build a small house in this land. Firstly the gains on flat are exempted?
3. Secondly, once I build the house, can I freely sell and apply the money to buy other properties?
Thank you for your kindness in replying.
Regards,
Krishnan
9894518737
Hi Mr. Solanki,
I am planning to sell a plot and I can exempt myself from tax my tax liability on the Long Term Capital Gains by investing on the profits into Government Bonds and or paying back loans. What are the conditions on the lender? does this have to be a financial institution? Will a repayment of loan to a individual lender be considered such as a loan to be repaid a family member?
Mr. Krishnan,
1. If you’re a NRI? & irrespective whether or not, sale of land [not specified] in India will attract the relevant tax provisions as per 54F.
2. The LTCG on sale of flat in constructing your own house will be exempted to the extent of the cost of construction, every FY, proportionately in each FY as the construction progresses unless you build it in the same FY. The cost of the vacant plot will not be included as you pre-owned it. [have you purchased it one year before the sale? if so it can be.]
3] After competition of construction of your house, as per LTCG, sec 54 exemption to be availed, you’ll have to hold the same for min 36mnths, else STCG.
After 36mnths sale again capital gains provisions will apply.
The above is as per present 54/54F sec provisions & only an advisory.
For detail aspects seek your consultants advise.
This site can’t be responsible in any manner.
Regards,
sir thank u for ur reply. Now i may make a deal of selling a portion of my house after demolishing the portion and selling it as a plot.Now i want to know can i use the money for renovating the present house and will it attract ltcgt exemption. Or can I pay 10% capital gains an use the money as i want.My doubt is whether 10% tax will be available for balance or am i to pay the tax for the full amount of the sales proceedings.
kseshadri
Muralidharan,
In general if you repay your loans with capital gains amount, provided the house is purchased not more than one year before the selling date, you get the exemption. Although money borrowed from relatives qualify for sec 24 interest exemption, but i am not clear on whether the same can qualify for the Sec 54 exemption.
You need to consult any good tax expert for your query or Mr. Vinay Joshi, who is answering readers here, can throw some clarification on this aspect.
Hello Mr. Yogeesh,
In the first place get to other bank to find out if they can accept it.
You’r query of CGAS, Syndicate Bank refusal, STATING THE SALE PROCEEDS SHOULD HAVE BEEN DEPOSITED WITH THEM BY OPENING CGAC – write a letter to the MD mentioning names of the
officers / managers. NO BANK CAN ASK FOR SALE PROCEEDS TO BE DIRECTLY DEPOSITED IN CGAC. [yes, big amount query of Cr. by bank, normal] If so ask them under which provisions you’re asking?
You have six months to establish CGAC. LTCG required to be deposited , UNUTILIZED, within six months & before filing returns.
However a ray of hope is – even if deposited in saving a/c, no CGAC established, say ignorance, the amount & interest accrued, INTACT – no withdrawals, the I.T can ‘POSSIBLY’ – repeat possibly can allow it, if, immediately invested in property.
The above cannot be assumed as an advisory but just a possibility.
It’s no small matter of paying 20.6% tax on 22L.
Regards,
Hello Sir,
I booked one apartment in Jan 2011 and I yet to get the possession of it. Now I want to sell it and purchase new one. So will it come under LTCG and STCG?
Regards,
Sameer
kindly let me know whether there are two types of taxation for long term capital gains in real estate
1.tax with indexation
2. tax without indexation
If so what are the percentages
k seshadri
Mr. Sameer D,
Sec 54, stipulates holding property for 36 months before sale to avail LTCG. Else STCG on sale.
Regards,
Mr. K Seshadri,
Do not confuse sec 54 LTCG v.s STCG as in equity gains.
LTCG with indexation if invested as stipulated no tax.
If not 20.6%.
No indexation prefered entire gains on sale will be taxed & computed as income from other sources.
However the entire sale proceeds – without indexation – invested in purchase of residential property & declared accordingly in returns there will be no question of taxation.
Regards,
Hello Sir,
I had purchased a residential plot in 2003, joint name of my spouse and myself, which I sold in oct’ 2013, as I had 50% share I got 40Lacs originally plot was of 8Lacs(Total). Further I had booked a under construction flat in my sole name Date of agreement of May 2012, property value of 60 lacs (approx), which I am paying in installments, since Jan 2011 (Ihad booked in pre launch), possession of the flat in june 2015.
Qns
1. will I be able to claim LTCG exemption under S 54/54F.
2. How the time limit for exemption works i.e from sale deed (in my case oct’ 2013), should I be looking the date of agreement or date of possession to get the exemption?
3. if date of possession works then what if construction is delayed and possession date is beyond june’ 2015. my Qn is in my case till what date (sale is of oct’2013) and possession should be ? to get exemption.
Thanks in advance
Hello Mr Jitendra,
My father had bought a piece of land in 1981, build house on it and now wishes to sell this residential property. He is 75 yrs old and to my knowledge has not filed IT returns in India ever though he has a PAN. From this sale he is planning to buy 2 flats (in different cities) and one land. What would be his Tax exposure.
Mr.Kishore,
Since sale of plot in Oct’13 where is your LTCG invested?
Booking in May’12 under construction irrelevant.
1] You have not stated investment amount of LTCG.
2] After Oct’13 sale within six months purchase of property, or amount to be deposited within six months in CGAS or bonds.
Regards,
Sekhar,
Firstly not filing tax returns ever can be a bigger issue with Income Tax if his income was taxable.
With regard to tax on gains, the exemption from land is available under section 54F. But the exemption is available only if the proceeds are invested in a residential property. No exemption can be claimed on investment in a land. Also, you cannot invest in 2 residential properties in 2 cities. The investment has to be in a single property.
But your first hurdle will be non-payment of tax. Once your father files his returns for claiming the exemption, the issue will come to the notice of IT department. However, this advice is based on the assumption that your father did not filed his returns although his income was taxable.
In my view you should consult a good CA to seek specific advice on this issue.
I have Long term capital gain of 45 lacs, the new property i wish to purchase is of 40 lacs.
Can i pay the stamp duty against the sale of this property by this capital gain account.?
I have sell my two flats in thane ( same time )and invest long term capital gain on two different flats in my native place ( same time) , can I avail tax exemption on both flats
Mr.Aditya Jain,
Yes you can. It’s cost of acquisition of property.
Regards,
I SOLD MY COMMERCIAL PROPERTY AND I HAVE CAPITAL GAIN ON PROPERTY. HOW I CAN EXEMPT MY CAPITAL GAIN ON SALE OF COMMERCIAL PROPERTY?
i have commercial property and earned on sale of that.now, i want to exemption on that,so how i can exemption?
Sir,
In this matter of three persons – family members- claiming pro rata LTCG tax exemption by investing in the same house property, please refer to the following case;
(2012) 19 taxmann.com 9 (Delhi ) (2012)135 ITD 102(Delhi)/(2012)147 TTJ 81 (Delhi ) case Asst. Comm. of IT Circle 33(1) New Delhi Vs. Suresh Verma
Although the case is not directly or indirectly similar, the ITO has taken the stand that since husband and wife are joint owners of the house property, the husband cannot claim LTCG tax exemption of 100 % of the cost of the new property and both husband and wife can claim 50 % each only. The husband wanted to claim 100 % exemption since his wife had no claim for LTCG tax exemption . Finally the ITO’s stand was rejected in tribunal and the husband allowed 100 % exemption as per his claim.
However, my point from the above case is that whether the ITO’s stand can be used to support my case where three related persons -a gentleman, his wife and his father in law- sold off their individual house properties in different places and invested the LTCG in a single apartment property in Mumbai and now they want to claim LTCG tax exemption in their own returns in the ratio of LTCG invested in the property, the total cost of the property being the sum total of the LTCG exemption claimed by the three.
Thanks for your relevant advice.
Kiran
Thank you,Sir
Sir,
With reference to LTCG tax exemption, I have another query. The person has invested his LTCG from house property say Rs 100 lacs in two different house properties. In one property in Mumbai, invested 50 lacs for part ownership along with two family members as the other part owners or co-owners and the balance 50 lacs he has invested in Surat house property for full ownership. Now he wants to avail tax exemption of Rs 100 lacs from both the house properties. Is it admissible ?
sir
after a portion of the plot is sold and with the money if i construct a new house which will be called as extension of portion already prevailing in the balance plot will i be eligible for LTCG or am i to construct a new house in a different plot to enjoy the benift
kseshadri
Dear Mr. Solanki,
I have a few questions wrt to capital gains tax. We are currently selling a house that is on my mother’s name. We are planning to use that money to buy a residential plot and construct a new house over there. Questions in this regard:
1) Will my mother be eligible for tax exemption under section 54 ? If yes, how should the same be communicated in the IT returns given that the period of consideration is 2/3 years ?
2) Can the new property be on a joint name – my mother’s and mine as I would want to apply to housing loans for the same and still claim the exemption.
Thanks,
Karthik
Dear Sir,
My parents jointly owned a house that they sold in Oct 2013. After indexation the LTCG came to around 15 lakhs.
They also purchased 2 flats in the same society in 2 different blocks and paid the 1st instalments of these flats in March 2013 and May 2013 respectively. Till date they have paid 1.55 crores. There is another 30 lakhs balance to be paid. These 2 new flats that are booked are still under construction and expected to be completed in 3 months.My father also owns another flat that he intends to sell and negotiations are on for sale of that flat and expected LTCG is around 1.7 cr. I would appreciate if you could advise:
1. Can the CG of sale of first flat (15L) (jointly held by my parents) and CG of second flat (owned by my father) (1.7Cr) be adjusted against the 2 flats booked and awaited completion (Total costs of 2 new flats is 1.85Cr)
2. We made the first payment in March 2013 and May 2013 respectively for booking the flats. Can this be taken, for purpose of S54, as purchased one year before transfer or is it the date of registration that is taken as date of purchase.
3. Does the new flats have to be in name of my father or can it be jointly purchased in name of my father and brother.
Thank you very much for your guidance.
Warm Regards
Mathew
thank u sir for ur advise. I have one more doubt where i will build a new house in the remaining portion of the plot.But the new building will be considered as extension of a house which is already there.Now kindly tell me whether i m eligible for ltcg exemption or am i to further subdivide the plot.
k seshadri
i purchase a flat around 5 years ago & now i sold it with a best deal
& purchased a new commercial property with the same money !!!!!!
a kind of investment will i get the exemption for capital gain?
Dear Sir,
My mother inherited a property from her mother i.e. my grand-mother in year 1991 which she sold off now for Rs. sixteen-lakhs. Amount received is completely reinvested in our first residential house as joint property with me.
I am confused, is she Liable to file any ITR for AY 2014-2015 for any such LTCG.
Thanks
Avishkar
Sir,
I booked an under construction flat in 2009, and am planning to sell it now in 2014 . I have not got the possession of the flat till now.
Please tell me if the profit amount of the flat will be taxable if I buy
a new property from the complete amount within 2 years of sale of old property.
Pramod,
Since you have sold two flats and bought two you can avail exemption on both if you can justify the amount invested in each flat in alignment with the capital gains earned from different flats.
Divyang,
Gains on any asset other than Residential House can be claimed for tax exemption under section 54(F).
K Sheshadari,
In general you do get exemption for remodeling, renovating an old house you have bought. However, i am not sure about exemption on only constructing an additional portion. You will have to get it clarified from a tax expert.
Karthik,
1. Yes your mother will be eligible for tax exemption under section 54. Since you are constructing anew house you wont be utilizing the capital gains at one go. In such instance deposit the amount in capital gains account scheme where in ITR you will be able to get exemption by showing the details of the account. From there you can then withdraw as per the need in next 2-3 years to construct the house. But do maintain the unutilized amount in the capital gains account scheme.
2. There have been cases where property for exemption is purchased in the joint names and court has ruled in the favor of assesse considering the entire funds for the house were invested by him only. So in my view you should be able to construct the property in the joint name. But do consult a tax expert before taking this decision as there can be some issues involved.
Mathew,
1. Firstly, if you want to avail capital gains tax exemptions on a house which is purchased before selling the existing asset then the house should have been purchased by max 12 months before selling date. So if your father sell his house in June 2014 then the new house should have been purchased after June 2103 and not before it. If it’s a house under construction even then the time limit is same but the construction should get completed within two years after the selling of existing asset.
2.In a house under construction preferably the date of agreement should be considered. Still you need to get this clarified from a tax expert.
3. Purchasing in joint name may have issues with the taxman especially if its with ones brother. With wife or children still you can be at ease as inferred from various court cases in the past where even if the house is registered in the name of spouse the exemption is granted.
4. Whether the two houses can be taken for capital gains exemption, in my view you can’t if the proceeds are from one asset. What has been interpreted of Sec 54 in a court case is that there is an in-built restriction that capital gains from the sale of one residential house cannot be invested in more than one residential house. So you cannot invest capital gains from one residential house in two residential houses.
These are my views based on understanding of some court rulings. With all such issues involved I will advise you to take a decision only after consulting with a good tax expert.
Manohar,
There is no capital gains exemption by investing in a commercial property.
Avishkar,
Yes she is liable to pay capital gains tax on the property sold even if it is inherited. However, she can claim exemption since she had invested the amount in a residential house. What various courts have interpreted and ruled that gains can be exempted even if property ownership include legal heirs.
You can get this clarified from a tax expert.
Priya,
There are different rules when a property is sold under construction and when you get the possession. What I understand is that till it is underconstruction the capital gains is calculated from the date of agreement. But when you get the possession the long term capital gains is calculated from the date of possession of the flat. So if you sell immediately after possession you may end up paying short term capital gains tax.
But this is my view you should consult a tax expert on calculating capital gains before you decide to sell the house.
Hello Mr. Jitendra,
This is to put in Finance Bill 2014-15, clauses 22, 23, 24 – sec 54[1], 54EC, 54F resp. in perspective.
So FY2014-15, AY2015-16 the LTCG provisions CLARITY
54[1] – 54F[1] benefits, inter alia provided now amendment – available if the investment is made IN ONE SINGLE RESIDENTIAL HOUSE situated in India.
54EC[1] – NO ambiguity now, LTCG investment part or whole in specified assets [specified bonds] – amendment – investment in subsequent FY can’t exceed 50L.
To summarise – 1] only one residential can be bought, 2] only 50L can be invested in bonds.
Regards,
Dear Sir, I had purchase a under construction property in Jan 2010 where as registration done on 22 Apr 2010. I got the possession Nov 2012 and I sold property in Dec 2013. Can I get the benifit for capital tax gain if I invest the amount in new property with in two years. I had not open capital gain account till date. Can I open the same and get the benifit.
Thanks for the input Mr.Vinay. This has removed many ambiguities.
Prashant,
Long term capital gains is derived when you have completed three years. But in an under construction property the rules vary when you sell it during construction or after the possession. As per my knowledge, once you get the possession then LTCG is derived from the day you get the possession. If that’s the case then you may not be able to claim the benefit as it will be treated as short term gains.
Kindly take assistance of a tax expert on this matter before you take a decision.
Dear Jitendra
Could you please help clarify this issue to me:
I am planning to invest in a plot of land in joint name with my wife. If we sell this after 36 months, will we be eligible for tax exemption under sec 54F, given that my wife does not own any other property, but I own 2 residential houses? Thanks and regards, Ravi
Mr.Ravi,
Amazing a question? YOUR DEAL IN FY 14/15 – AY 17/18 taxation you expect Mr. Jitendra to answer it now!?
FYI, the present Financial Bill 2014-15, sec 54F[1] states constructing ‘one residential house.’ Further 54F[1], existing provision inter alia, states that if capital gains arising from a long term capital asset not being a residential house, purchase , or within a period of three years construct a residential house [from the date of transfer], then the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. [sec45]
However as per present provisions, you can get benefits.
Regards,
Hi,
I had purchased flat in 2009 and sold in jan 2014. Hence LTCG is levied.. As a next step I purchased another residential property in a months time with lesser amount.
e.g. I Purchased my property for say Rs,100 after indexation it became Rs. 175 , in Jan sold my property for Rs 180 and invested Rs. 135 in new property.. Hence for Sec 54 calculation will I consider – Rs 45 (180-135) as Capital Gain and claim exemption of 135 as invested or Capital Gain will be 180 and claim exemption of Rs. 33.75 (i.e. 135/180*45)…
Please suggest
Mr.Vasim,
Capital gains is the difference between the sale proceeds & the cost of acquisition of the apartment you are selling. [STCG/LTCG]
The cost of acquisition used for computing LTCG is the indexed cost of acquisition. FY2014-15, AY 2015-16 -1024. [also check my July 11, post above.] No commercial property investment.
BTW, your LTCG is Rs.5/- [over simplified to info you.]
Regards,
1. We wants to construct a house on a residential plot which is owned by the name of me & my wife.
2. We are selling a residential plot which was purchase in 2004 and the owner of plot is my wife only.
can we get Long term capital gain if the amount of plot selling / profit use for construction of a new house?
please advice.
Ravi,
There is a clause under sec 54F which limits the number of properties you can hold. As per this clause “the assesse can hold only one property other than the new residential property on the date of transfer. Even after three years of purchase of the new property, no new property can be bought else the capital gains become taxable.”
So keeping this in consideration you may find it difficult to get exemption for yourself if provision remains the same. However its a tricky issue where Assessing officers may have their interpretation. Its advisable that you consult a good tax expert who can guide you in detail.
Pramod,
In my view Sec 54F exemption benefit is available even if the property is owned jointly by couple. This has come from few court rulings in the past wherein the property is owned jointly but the entire money for purchase/construction is put in by the assesse on whose name capital gains is derived. Still advisable to involve a tax expert to know the exact situation.
Thanks Sir
Dear Jitendra,
I owned a shop (i.e a commercial property) with holding period of more than 3 years. Now i sold my shop after claiming indexation, and the long term capital gain arrived on sell of this shop is been invested in purchase of a residential property. Will i get deduction under SEC 54F* and till what limit??
* 1) I dont own any other residential property.
2)The new purchase is done within a year of sale of shop.
3) The whole capital gain amt is been utilised in the purchase of r esidential property.
Is there any capital gain exemption if i sell my commercial property and with that amt i reinvest in a residential property???
Hello Sir,
I earned some profit by selling shares/stakes to foreign company. As per advice I can invest in one residential property.
1) I had two houses which were jointly owned
a) First house father and I owner
b) Second house wife and I am owner
2) I also have commercial property and couple of agricultural land
Before transaction I gifted my portion of house to my father so that I can own only one house before transaction.
Later I purchased under construction property by paying full amount to builder. He promised to give possession before April 2015.
Here is order of transaction
June 2013 – Hold two joint residential property
10 July 2013- Gifted one residential property to Father
20 July 2013 – Signed agreement for sale of shares
10 August 2013 – Received fund for capital gain account.
20 Oct 2014 – Purchased under construction property
15th Nov 2014 – received soft possession letter
Need few clarifications
1) Do I need to pay wealth tax for non occupied property such as above for this FY or last FY when I still have not occupied or have not received occupation certificate from builder.
2) What is the maximum time I should get possession of this property to make sure I get Section 54 benefits. 2 years or three years from the time when I received funds of capital gain or we need to consider
3) Can I sell this property within three years of agreement (not possession). What would be implication of the same.
Regards,
Rajesh
Can I deduct Stamp duty & Reg Chargest paid for purchase of new property from LTCG arise by sold of my old property.
LTCG – ( Invest in new property + ST & Reg of new property)
15,00,000 – ( 10,00,000+5,00,000) = LTCG Nil
Dear Jitendra,
A query regarding long term capital gains from sale of unlisted shares:
Say the total consideration is Rs 100.
The long term capital gain after indexing is Rs 70.
How much money should be deposited in the Capital Gains Account ?
The total consideration received ? That is Rs 100?
Or the capital gains only ? That is Rs 70?
Finally what is to be invested one residential property? Entire sale consideration or only the capital gain?
All other conditions are met.
Assessee has no other property in his name. And has time to open the capital gains account by 31st July 2014.
Thank you.
Simple query requiring
Mr. Mahesh Deorukhkar,
All official charges, levies & duties paid to acquire a property is cost of property acquisition. This also includes brokerage if paid by cheque.
Regards,
Mr.Rajesh,
This portal pertains to sec 54 & allied secs inter alia LTCG/STCG.
No immovable property sold so LTCG/STCG does not arise.
However address your concern–
For wealth tax purpose wealth constitutes property, urban land, jewellery, yacht, boat, aircraft & cash in hand excess of 50K.
Wealth tax is 1% of the value of net wealth exceeding Rs.30L.
Any one house property is exempt from wealth tax & if the other house is let out for at least 300 days, commercial property if used for own business purpose, equity & MF’s investment held as stock in trade or as for business purpose.
To benefit from sec 54 LTCG one has to hold the property for min period of 36 months. Title & interest.
This is broad overview, Finance Bill 2014 to be ratified by the parliament.
Regards,
Mr. Karan,
Yes you are eligible for 54F exemption.
Regards,
In case the residential House property purchased u/s 54 is acquired by government under compulsory acquisition scheme with in the period of 3 years then.. will the capital gains exempted earlier be taxable?
Rs.100 should be invested in house for getting full deduction of capital gains
Ms.Sruthi,
Capital gains arising from transfer of an asset by way of compulsory acquisition, taxation as per 45[5], excluded certain property, tho’ sec 45 provide for charging of any profits from transfer of a capital asset.
sec 5 provides for the compensation or enhanced compensation by the court, tribunal or other authority, 5[b] had stated that it will be deemed to be income of the previous year.
The ambiguity is cleared.
So the proposed amendment, states that such an amount received shall be deemed to be income chargeable under ‘Capital Gains’, in the previous year in which the final order of such court or tribunal or authority is made.
Regards,
Kiran Gera,
Unlisted securities & debt MF’s, the holding period is 36mnths, for LTCG, AY2015-16. CBDT is yet to announce its taxation effective date on MF debt funds. Nothing can be retrospective in case of MF’s, unlisted clear.
Your LTCG is 70 on unlisted securities.
You invest 70 to avail LTCG. Go ahead.
Regards,
P.S – As per Finance Bill 2014, to be ratified by the parliament.
Ms. Sruthi,
I await your reply if any? under which provisions have you advised 100% to be re-invested?
Regards,
Thanks a lot
I have 2 Qs re LTCG-
1. Is LTCG from earlier (older) property proceeds considered exempt if used to repay home loan taken to purchase new property at a later date (within 1 year)
2. Do i need to invest full proceeds from older sell for getting LTCG exemption or I can invest only the actual LTCG ? (for eg, if my initial investment cost of 100 indexed to 150 at time of sell, and if i sell for 180, i have LTCG of 30. is it mandatory to reinvest 180 or i can invest 30 (either in new property directly or repay home load taken for new property) and get LTCG exemption?
Dear Sir,
Really nice blog, I have some confussions, I have two propertys on my name I want to sale both proeprty and want to purchase a big one as both are very small accomodation. Could you please suggest how can I get tax releif. Like
1) One is five year old 2) is Possestion in this month both are in same city. Both are on my name.
2) The new proprty which want to purchase is also on the same city.
It would be really helpful if you can suggest, if I would sell both the propety how to show that tax benefit will get as purchasing new peoprty from the earning. But heard somewhere that short term not applicable if you have more than one property.
Man Thanks
Hello Sir,
We have sold our property in FEB 2012 (transfer date : 26th FEB), but till now we did not purchase any property.
Q1 : So is there any way that we can save our gain property gain tax.
Q2 : if in case no, then we need pay tax by this 31st July,2014 as two years already completed.
Q3 : can we buy any residential plot now.
Q4 : in 3rd year extension, will it allowed builder constructed property. In this, builder is ready to give back date allotment letter but not possession letter .
Thanking you in advance.
Regards,
Punam Shah
Mr.Sandeep,
Address your 2Q’s.
1] During the FY if LTCG invested as per stipulated norms, within a year new property bought on home loan, repayment eligible.
The new property has to be in your name, hold title & interest.
2] When you talk of indexation, obviously LTCG invest.
Regards,
Mr.Sachin,
LTCG can be availed if the immovable property is held for 36 months min.
For ITR first will be LTCG, second STCG.
Regards,
Ms. Punam Shah,
Since Feb’12 till date where is your LTCG invested? Have you established CG, S/B a/c? [capital gains s/b a/c within six months.]
If so you need not worry!? What was your ITR then? Your bank s/b a/c, AIR will be there. [annual info report, mandatory for sudden upsurge, they may have asked you also?!]
If not followed LTCG aspects then, 20.6% taxation. Default with penal interest.
If you’ve not followed LTCG norms in FY 2011-12 AY 2012-13 & pay tax the question doesn’t arise where you invest.
A glimmer of hope is??!! —– in the event the sale proceeds recd in your s/b a/c, NOT A PENNY TOUCHED, — no inward/outward transaction TILL DATE, IT in the case can consider it, IF THEY FEEL SO!
NO REGULATION TO CONSIDERATION! I’M JUST PUTTING IT & NEED NOT BE TAKEN AS ITax PROVISIONS!
[further, irrespective of this post, not portal view on IT consideration.]
If capital gains a/c established, periodic payments to under construction house is possible.
Regards,
The Assessee has sold (1) 0ne flat which was self occupied (2) land . Now he has started the construction of a single residential house using the sale proceeds from (1) & (2). Here he wants to claim both (1) & (2) u/s : 54 & 54F respectively.
My query is
Whether the assessee can claim both the above (1) & (2) ie Sec 54 & 54F towards the construction of the single residential house.
Would appreciate if you could give a valuable feedback
Thanks in advance
Tejashwini Ram
Sir we bought one land in the FY 1997-1998. Recently in may 2014 we sold for 10lakhs, how to get exemption from capital gain. Already i have one residential property. some people said to invest in bonds but after 2years i like to spend that money for my son education. pls guide me.
Aravindh,
If you need money after two years then there is no such provision where you can get exemption by investing for such a short period. Even if you deposit it in capital gains account scheme you will still have to invest in either bonds or residential property to gain exemption. But since you already own a property the exemption may not be available to you as per rule under Sec 54F. In such situation its wiser to pay tax and utilize money for your goal.
You can confirm the taxation aspect from a good tax expert.
Sir,
I have sold 2 flats and bought 1 flat. Can the capital gain for both the flats applied to the new flat ? In short can one sell 2 different flats and buy only 1 flat to get the capital gain benefit.
Aravindh,
Few more clarification. If you deposit the amount in capital gains scheme for two years and show it in your ITR your tax ability will not arise instantly. However, if the mount in capital gains scheme remain unutilized in the specified period i.e. it is not invested as per provision, then the amount will be chargeable as capital gains in the financial year in which the specified period expires.
Dear Sir,
I have sold on property two years and nine months.The capital gain was deposited in capital gain account.Now i have two options before me-1To construct house in already purchased plot & 2nd to buy a new plot tomorrow and get it constructed for residential purpose.I have only two and half month left for claiming capital tax exemption.If the capital gain was 15 lacs and that money is invested in two and half month while the total construction cost is 35 lacs and it would take another six month in completion of house.What would be the status of capital gain tax exemption in both the case.
Regards,
Rajiv Sharma
Mr. Rajiv Sharma,
As per LTCG norms not possible, your CGa/c can continue for five years w/o taxation.
Regards,
Mr. Milind,
Yes.
Regards,
Mr. Jitendra,
After five years CG a/c is released.
Regards,
Ms. Tejaswani Ram,
Yes.
Regards,
Thank You Mr . VInay Joshi for your valuable feedback.
Dear Vinay ji,
Thank you so much for quick response.
Could you please explain me on details. I do not have any idea regarding policies.
So It would be really heplful if you can explain in details.
Mr. Sachin,
What details you expect me to explain?
There’s no question of policies. Income Tax Act stipulates certain conditions on capital gains on immovable property, sec 54 & allied 54 secs.
54[1], if resi prop. held for more than 36 mnths min, LTCG after indexation to be invested as stipulated.
If the property is not held for 36mnths, having title & interest in the said property, if sold will attract STCG as [per your tax slab rate.]
For intricacies of bare secs 54 pl go thro’ IT Act.
FURTHER IT’s YOUR MISCONCEPTION THAT STCG NOT APPLICABLE ON SECOND PROPERTY SALE!
Yes if two properties held for 36mnths, min, on sale STCG not applicable. I hope i’ve over simplified the concept & cleared your doubts.
Regards,
Mr. Sachin,
Further Mr. Jitendra has very eloquently explained the concept of understanding sec 54, possibly you’ve not paid attention to it.
Regards,
i live in land craft ghaziabad. i sell my heritage property and purchase floars in a same location. in wich builder make ground floar, first floar and second floar. i purchased first floar and second floar and make it one unit in wich kitchen is one and registry also be one and ground floar is different bulider property is it allowed according to new budget policy
We four biood brothers are having residetial vaccant land”A” with equal undivided share ,got, throuh settlement amng us.We are aiso hving residential vaccant land “B” in the same names.Now we propose sell the property “B” and construct apartment in the propety “A”.Advise me about the capital gain tax involved.
If I sold one flat & purchase new flat with in two months and taken a loan from bank. After four months sold another one flat and paid loan taken from bank. Can deduct amount paid to bank from LTCG. All transaction happened in one year.
Mr. Mahesh,
Yes if you’re following LTCG norms as stipulated.
Regards,
Mr.S Samarth,
Please refer to the eloquently posted aspects on 54F by Mr. Jitendra P.S Solanki, in respect of availing LTCG benefits.
Have you not read it at the start?
You can claim, please read details.
Regards,
Mr. Surya,
What is meant by ‘land craft’? Not understood.
Gains arising from sale of agricultural land taxable only if the land qualifies as capital asset – meaning if situated within the jurisdiction of municipality or cantonment, within the distance measured aerially with certain stipulations i.e 2km/6km/8km & population.
Your inherited [vacant land] property, if i understand, the LTCG to be invested as 54F[1] as explained by Mr. Jitendra Solanki in the portal.
Mr. Jitendra has also explained the ratio allowed to claim LTCG.
Secondly as per the proposed amendments to sec 54, ist floor & 2nd floor can’t be clubbed as one residential house, especially when ground floor is third party owned.
Mr. Jitendra will advise you more on this.
Regards,
Purchased a Flat in 2003 for Rs.11 lakhs, Sold it for Rs.18.40 lakhs in Sept., 2013, closed Housing Loan Liab. of Rs.9 lakhs through proceeds of Advance Sale amount, Availed a fresh loan of Rs.21.50 lakhs to purchase a new house worth Rs.40 lakhs. Rs.18 lakhs of sale consideration of Flat received in 2013-14 only. The Sale RegnTransaction for New House took place in Dec., 2013. Whereas Sale Regn of previous Flat took place in April, 2014. How to furnish the details in ITR of FY 2013-14.
Mr. Aravindh,
You have sold property for 10L, what is your LTCG amount?
Is the difference, tax free, not sufficient for your need.
If you require 10L at a stroke, no provisions as rightly advised by Mr. Jitendra.
Regards,
Kiran Gera,
The Lok Sabha approved of certain changes made in the Finance (Bill) No. 2, 2014.
1) Unlisted securities and units of MF transferred between 01-04-14 and 10-07-14 shall be deemed to be long-term capital assets, if held for more than 12 months.
2) Long-term Capital Gains on Units of Mutual Funds transferred between 01-04-14 and 10-07-14 shall be taxable at 10% without indexation.
3) A third proviso has been inserted in Section 92C to provide that where more than one price is determined by the most appropriate method, the arm’s length price shall be computed in such manner as may be prescribed. Accordingly, the provisions of first and second proviso (arithmetic mean and tolerable range) shall not apply.
Regards,
G Alexander,
For claiming capital gains exemption the purchase of new house or construction can commenced within one year before the selling date of old house. So even if you have purchased it before selling your old house you can claim exemption of your capital gains. Also, closing your home loan through capital gains is an eligible exemption. For furnishing details in ITR you should seek advice from a CA as i do not have expertise on it.
Mr.Vinay Joshi may provide some inputs.
I just can’t understand what happens to the interest earned in the capital gains savings account? 1. you cannot withdraw it. 2 you pay tax on the interest. what happens when you close the account? are we supposed to invest that in the property too! if one is in the 30% tax bracket and if one invest Rs. 1 cr in the cgsa. In 2 years the tax liability will be Rs. 6L! Kindly clarify.
Mr. Jitendra P.S Solanki,
This query is not in respect of sec 54 & its aspects.
Re filing of ITR complete 2013-14 financial details should be available.
First it defeats that a housing loan for 11L purchase AFTER 10yrs 9L balance!? 18.4L realization.
If the said loan is from friends & relatives LTCG repayment can’t be possible. If from banks the amount of 9L repayment is questionable.
In the first place to determine LTCG, 2013 sale.
An advance of 9L -50%- can be paid only after a sale deed agreement as per stipulated terms.
Secondly, availed loan 21.5L to purchase 40L property.
What IS THE SOURCE of 18.5L PAID? It’s no questioning.
ITR aspects.
Further why this query on the fringe of ITR filing?
Regards,
Hello Sir,
I am NRI and filing IT Returns.
I have bookings in following properties :
1. Commercial office in Delhi since 2007. Amount paid Rs. 80 Lakhs.
2. Residential flat in Chennai since 2008. Amount paid Rs. 60 Lakhs.
3. Residential flat in Jaipur since 2010. Amount paid Rs. 20 Lakhs.
No possession letters received till date but expected by end of 2014.
Allotment letters are more than 3 years old for all above 3 bookings.
If I sale all the three bookings now, amount I will receive Rs. 90 Lakhs for 1, Rs. 65 Lakhs for 2 and Rs. 22 Lakhs for 3.
Will the gain considered as Long term capital gain ?
Is the indexation benefit available ?
Is it available for commercial property also ?
If available, my calculations show that I will have loss. Will that loss be considered as Long term capital loss ? And can it be carried forward ?
Thanks for your valuable time.
Thanks for the clarification Mr.Vinay. Seems lot many transactions in a spat of time is denying any benefit to Mr. Alexander. Need to be careful while going for house purchase before selling the previous one.
Mr.Mittal,
Allotment letters do not constitute or in any way you have the title & ownership of the properties. Neither are you in possession of the said properties for min 36mnths, as no interest, rights & rightful holding created. No LTCG applicable.
Regards,
please put more light on it i am not understood it,
my question is?
i clubbed two floors and make it a single unit or duplex and ground floar is owned by builder not myne. so according new budget policy is it allowed ar not
sir,
my mean to say, i sold my residential house wich was purchased in 1975. and ” LAND CRAFT ” is residential society in city ghaziababd.
please put more light on it i am not understood it,
my question is?
i clubbed two floors and make it a single unit or duplex and ground floar is owned by builder not myne. so according new budget policy is it allowed ar not
Mittal,
In under construction properties then yes LTCG derived from the date of entering an agreement with the builder. But this provision is applicable only if you sell it while under construction.In case you decide to sell after possession then LTCG will be derived from the date of possession of the property.
With regards to your situation there was a court case of Mrs. Madhu Kaul Vs. CIT where the P&H high Court held that “identification of the flat or physical delivery of possession is irrelevant as right to hold properly stands crystalised upon allotment. The allotment of a particular flat and delivery of its possession would relate back to the allotment. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.”
Referring to this specific case judgement it seems LTCG can be derived on the basis of Allotment letter if the specific flat/property is clearly defined. You can read the case in detail here:
http://www.jitendrapssolanki.com/wp-content/uploads/2014/07/Allotment-Letter-Case.pdf
However, my view is totally based on this case and it is a general observation. For specific advice on your situation you will have to consult a tax expert who will be able to guide you after analyzing details of your properties.
If any LTCG is there then tax liability will be determined with indexation benefit.
Mittal,
In an under construction property LTCG is derived from the date of entering an agreement with the builder. But this provision is applicable only if you sell it while under construction.But in case you decide to sell after possession then LTCG will be derived from the date of possession of the property.
With regards to your situation there was a court case of Mrs. Madhu Kaul Vs. CIT where the P&H high Court held that “identification of the flat or physical delivery of possession is irrelevant as right to hold properly stands crystalised upon allotment. The allotment of a particular flat and delivery of its possession would relate back to the allotment. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.”
http://www.jitendrapssolanki.com/wp-content/uploads/2014/07/Allotment-Letter-Case.pdf
Referring to this specific case judgement it seems LTCG can be derived on the basis of Allotment letter if specific flat/property is clearly defined.
However, my view is based on this case judgement and more guidance can be provided to you by a tax expert who will analyse your property in details.
LTCG whenever applicable is calculated with indexation benefit.
Dear Vinay,
Your views on this case judgement-
http://www.jitendrapssolanki.com/wp-content/uploads/2014/07/Allotment-Letter-Case.pdf
Does it illustrates that LTCG can be derived on basis of allotment if the flat/house is clearly specified?
On the verge of selling our tenancy rights (possession) to a builder in return of cash. Does it fall under LTGC ??
If yes then can i invest the same in NHA bonds??
What is the probability of i loosing all money in NHA bonds??
Means it is not necessary to pay an amount directly to builder.
I can borrow money from someone for payment to builder and afterward (after selling old flat) I can make payment to borrower with in a year from purchase of new flat.
Hi Mr. Solanki,
I have sold a land and a flat. Using the proceeds I have bought a bigger flat. Can I claim relief under both sections 54 (for flat) and 54F (for plot)? The purchase price of the new flat is more than the sale value of both the properties. Also, I have only one additional residential property in my name, hence I am eligible for 54F relief as well.
Mr. Jitendra P.S Solanki,
The aspects put up by you noteworthy.
However they relate to LTCG investment vis-a-vis allotment.
Many such aspects are there, IT aware.
Mr.Mittal has not invested any LTCG, NEITHER CLAIMING LTCG in investment, – POST IS DIFF- in fact trading as NRI, if IT dept. calls it 45/50 secs. [of course he can’t come under 50c, not a builder /developer.] He has to explain if stock in trade?
This is in my considered opinion. What sec 54 reads?
Regards,
Vinay,
Mr.Mittal is discussing about investing his gains if he sells the properties for which he hasn’t received possession but only allotment as of date. I believe this case then will hold importance for claiming Sec 54/54F benefits. Although i am not very sure whether the taxman will give the benefit uprightly or takes a different view. How will it come under stock in trade? I am not very clear on it.
Hi Mr. Solanki,
Thanks for this article. I need some more clarification on the below clause you have mentioned:
“One of the larger benefit of Section 54 is that one can hold n number of properties as on the date of transfer and still claim exemption on the gains.”
My mother holds 3 Residential Properties. Of these the 3rd property is under construction and is hold jointly with me.
She is selling her 1st property now and wish to invest the same in another under construction property.
Queries:
1. Can she avail the exemption under Section54 for this capital gain?
2. Can this property be owned jointly with me the second holder?
Dear Sirs,
Thank you for your advises and comments. I am not trading in real estate business. I live in Dubai for over 30 years and do my investments in India and for NRIs best investment avenue is real estate and stock market. I am holding shares of more that 100 companies in BSE/NSE. I do sale/purchase there and my gains/losses are treated as STCG or LTCG depending on the period of holding. They are never treated as my business income/loss.
Similarly if I hold allotment right in more than one property then it should not become as my business. I am not doing it on business scale like a builder or developer. Rights are held by me for a considerably long periods (like from 2007 & 2008 & 2010) and I have been religiously paying the construction-linked instalments.
My intention of selling these rights now before possession is that I dont want to wait another 3 years to make it long term asset. It is established that if I take possession, holding period will be counted from the day of possession.
I have gone thru the provisions of IT Act on CG on GOI website ref : http://www.incometaxindia.gov.in/archive/how_to_compute_capital_gains_2008-09.pdf
It says “though there is no definition of “property” in the Incometax Act, it has been judicially held that a property is a bundle of rights which the owner can lawfully exercise to the exclusion of all others and is entitled to use and enjoy as he pleases provided he does not infringe any law of the State”.
In real estate transactions it is universally accepted that allotment gives the RIGHT to the investor to sale/transfer as and when he/she/it wishes and earn/lose money.
In these circumstances kindly advise if my transaction falls into STCG or LTCG and if it is LTCG then whether indexation benefit will be available.
If I apply indexation benefit then the transaction results in LTCL. Will I have to reinvest the 100% PROCEEDs in specified assets even if I incurred loss ?
Thank you for your co-operation, support and advise.
Mittal
Mahesh,
Whats important is that the construction of house need to get started and completed on time or the house should be purchased within the stipulated time. You should be able to prove that the house is yours.
Thanks a lot for information.
Mr. Jitendra,
Reproduced my para as under of the previous post as under ;
“Mr.Mittal has not invested any LTCG, NEITHER CLAIMING LTCG in investment, – POST IS DIFF- in fact trading as NRI, if IT dept. calls it 45/50 secs. [of course he can’t come under 50c, not a builder /developer.] He has to explain if stock in trade?”
IT SEEMS THE BRACKETED ASPECTS OVERLOOKED.
Explicitly stated by me that 50c can’t be invoked the assessee [in the event] is NOT A DEVELOPER BUILDER!?
Secondly uncomprehended is – DOES THE ASSESSEE EXPLAIN TO IT IT’s NOT STOCK IN TRADE?!
Mr.Mittal has different views on this aspect, i’ll address him separately. Here itself i’m telling Mr.Mittal, that the two posts are misunderstood by him.
Mr. Jitendra, you’re well aware how the dept. interprets to it’s own advantage. [i’m deviating.]
Are you aware of a frivolous appeal has cost IT dept.3L?
Just a couple of days back Bombay HC, directed the dept. to pay for frivolous appeal & wasting court time.
The ITAT had set aside the dept. order imposing penalty ON L&T.
Now further ITAT has passed order in case of lyricist Javed Akhtar, RS,MP. 50% expenditure spend is revenue expenditure. [The case related to his biz entity undertaking installation of lift in the bldg, a CHS, where he has a resi flat & office premises. The CHS didn’t replace old lift, he spent 17.2L, the claim was 100% revenue expenditure. The said order treated 50% as for professional purpose.]
My aspect is in the above two cited cases, the parties relied on IT aspects, NO FRIVOLOUS ITR FILING!
Yet the dept. views were contested as they are capable to contest.
Once again i reiterate THAT NO WHERE I’ve STATED THAT 50c will be applicable. [stock in trade.]
Regards,
Mr. Mittal,
In the first place I congratulate you for remitting your valued forex into India. [i also get & had asked NRIs to invest in the swap a/c, then.]
You’re a HNI, NRI, investing in capital markets & real estates.
One has to ‘create wealth’ ‘not earn it’.
Every year you file your ITR in INDIA?! You have tax advisers! Can you explain?! In a tax free country where you take tax credit?
It’s not my point. My aspect is you’ve post in the ESTEEM forum, Mr. Jitendra P.S Solanki, running it for the benefit of taxpayers – FREE COUNSELLING, GUIDANCE.
THIS IN THE FIRST PLACE HAS TO BE APPRECIATED.
[i’m as an independent post, to corroborate certain aspects & views.]
What did your tax advisers say on sell LTCG? [also read my earlier post to Mr. Jitendra.]
I’m telling you it will be STCG.
[No where its stated 50c, can be invoked, YOU HAVE A WRONG IMPRESSION.]
FYI, i’ve given two recent cases of arbitrary dept .aspects interpretation.
Case like Javed Akhtar [ITAT] another assesses aspect is ‘that the road build for professional aspects for the convenience of his clients, [Javed A. has relied on that-in his case lift, rightly called escalator] & spends 30L, – IN THE CITY OF BOMBAY- as BMC failed – [for argument] can be allowed?
TODAY AS A TAXPAYER I CAN APPEAL AGAINST THE ITAT ORDER AGAINST JAVED ORDER FOR ALLOWING IT AS REVENUE EXPENDITURE!.
At the same time i’ve also put up in Mr. Jitendra’s post that Bombay HC has penalized the dept 3L! It was a frivolous appeal dismissed with penalty. [L&T case]
So aspects are totally different in interpretation .
Regards,
Mr. Mittal,
A correction —- it should read as elevator & not escalator as stated.
Regards,
Dear Mr. Vinay Joshi sir,
Thanks for your detailed clarifications and sorry I misunderstood you on stock-in-trade.
Yes, I have taken advise from my tax consultant and his reply is same as yours. I furnish below his reply :-
Q 1. Will it be treated long term capital asset.
Ans: Until registration is done, it should be treated as STCG and if any gains arise will be treated as a premium for you. But there are some court case which says, “Duration of cap gains must be based on date of allotment”. So your case says, it’s a long term, but you might need to end up with fight with assessing officer with tax lawyer to prove your point.
Read here: http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?autono=981630
Q 2. If yes, will I get indexation benefit. After indexation, cost of aquisition works out to Rs. 83.0 Lakhs when index is applied to year-wise payments.
Ans: As suggested above, it will again depend on whether you are ok with considering this as short term, then no indexation. If you go for long term then indexation will apply.
But in most cases it is getting treated as short term because possession has not been taken.
In view of above what stand I should take while filing the return ?
Should I file as LTCG and then let IT disallow it. And then I go for appeal ! Or I file it as STCG and pay the taxes accordingly.
Thanks again.
Mittal
Mangesh,
Yes she can claim the exemption under Sec 54 if we go by the provisions.
Yes, as per rulings from few court cases in the past, exemption can be availed in case of joint properties also provided you have a substantial proof that the entire money utilized for the purchase of the house was sourced by her.
But its advisable that you consult a tax expert to get a clear picture of your situation.
Dear Mr. Joshi & Solanki,
Please help. we are on the verge of selling our tenancy rights (possession) to a builder in return of cash. Does it fall under LTGC ??
If yes then can i invest the same in NHA bonds??
What is the probability of i loosing all money in NHA bonds??
Nilesh,
You can claim exemption from multiple properties by investing in a one single property. However, this provision has been allowed within the same section. I am not aware of clubbing of Sec 54 and 54F. In my view it will not be allowed since conditions for both are slightly different.Also as per sec 54F you should not be holding any other property apart from the property on which you are claiming exemption on the date of selling the existing one. This means post selling of your land you should be owning only one residential property. Considering this aspect Sec 54F may not be allowed if you have more than one properties.
Kindly consult a tax expert to get more clarification on your situation.
Chetan,
My view,
Post amendment 1995 any tenancy right when surrendered for a lump sum payment is subject to capital gains tax. If the rights has been held for more than three years then long term capital gains tax will arise. You can claim exemption by investing in Residential house or capital gains bonds.
For detailed clarification take assistance from a tax expert.
Surya,
With new budget provision you cannot purchase two floor and clubbed into a single unit. Now exemption will be available only on purchase of one house.
Vinod,
Interest earned on capital gains scheme has nothing to do with taxation of capital gains and its exemption. The interest is your income and taxable as a savings account interest i.e. added to your income.
I have sold shares of a private and unlisted company in the year May 2012. I have invested in a residential flat under construction. I have paid 30% of money as advance and rest of the money deposited in a capital gain a/c. By 2014 he did not hand it over as promised. He will be handing over the flat in March 2015.
Am I eligible for Sec 54F ?
One auditor told me that ‘under construction independent house’ is eligible for sec 54F upto 3 yrs; but the ‘under construction flat’ is eligible only for 2 yrs. Is there a difference between the ‘under construction residential flat Vs residential independent house’ ?
I will appreciate your opinion
Dear Mr. Solanki,
Thanks a lot for your reply. I just have one more query regarding this topic. Can i claim indexation benefit on the improvements that i had undertaken in my house??
We are staying in this house from more than 50 years and have put some money in renovation.
Hi,
I have a query regarding set off of losses
Whether Loss due to Interest on Housing Loan on Self Occupied Property can be set off against Professional (Doctor) Income.
Thanks
Tejashwini Ram
Mr. Mittal,
Please do take Lakhotia Associates opinion or simply write to the channel to address your query.
There is no such thing as year wise payment indexation. So as you talk of indexation – which is the year of acquisition? Its cost indexation.
If the dept. asks you what is the amount of maintenance charges / property tax paid by you? [post possession after 36 mnths 54 LTCG as per prevailing provisions.]
You have to take a decision on filing LTCG/STCG returns but filing important within due date so as to revise later & c/f losses if any.
Kindly excuse my belated reply, was out of town.
Regards,
Ms. Tejaswini Ram,
In SOP there never can be losses in interest to be set off.
It can be in the case of LOP.
Regards,
Mr. Rahava Raju,
The question of 54F [sale of land] does not arise & you are not constructing independent house. Yes different aspects of self construction & flat booking in a developers residential construction.
You can rely on several court cases as narrated by Mr.Jitendra as above in case [replies] to Mr.Mittal. The benefit of the date of allotment.
Mr. Jitendra will advise you more in the aspect.
Regards,
Hello sir
Sub: query regarding capital gain exemption u/s 54F
I have sold a commercial property and invested the sale proceeds in purchased of land for construction of residential property to claim exemption u/s 54F. now i am entering into development agreement with builders for construction of residential property by forgoing some share in property.
so now my query is whether still i am able to claim exemption u/s 54f after forgoing interest in property
thanks in advance
Akash,
Refer to a previous court case decision ([CIT v. Smt. K. G. Rukminiamma [2011]) the Karnataka High court has ruled that exemption is available to the assesse under joint development agreement with the builder. So in your case you should be able to claim exemption on the house (Only one residential house as per provision in budget 2014) you will own in this agreement.
However, do consult a tax expert for analyzing your situation.
Tejashwini,
There is no loss of interest as Mr. Vinay has pointed out. You will have to calculate your “Income from houes property” under which if there is any loss you can carry forward it or set off.
Seek assistance from a CA for deriving these calculation.
Chetan,
Yes the expenses incurred on improvement of house are included in the cost and so indexation benefit can be claimed on the same.
Dear Mr. Solanki,
I had a query – I sold a flat in January 2013 and the capital gains were deposited in the Capital Gains Savings Account. I had booked another flat in June 2011 (registration done in June 2011) for which I am about to get possession from the builder. There is some amount pending which is to be paid to the builder now; my query is, can I use the deposited amount in CGSA to pay this as this is a payment due to a builder for a house within 2 years of the sale. Kindly let me know. I am told that there have been some disputes with the IT department in the past where the verdict has gone in favour of the individual.
Regards,
Swapnil
Raghava Raju,
In my view, the time period for claiming the capital gains tax exemption is same in both cases i.e. the property should be constructed within three years from the date of selling. I haven’t come across the difference in the time horizon between a self constructed and a builder flat. So you should ask from the auditor if he can give you relevant quotes from the Income Tax Act for this provision.
The two years horizon will be applicable only when the construction of house started well before selling your shares. So if you signed the agreement for new house in 2011 i.e. one year before, then the period of construction post selling date is two years which actually completes three years of construction.
Swapnil,
It may have been possible to claim the exemption of your capital gains on the house you bought in 2011 had the time horizon between the two would have been within one year. Both section allow you to claim exemption even if you purchase or start construction of house within one year before the selling date. Put simply if the house has been booked in June 2012 or afterwards then exemption was available to you. But since you booked the flat way before this you won’t be able to claim any exemption if you utilized the CGAS amount for payment to the builder.
Hi Mr. Solanki,
I have one query. I have sold one Residential and one Non-Residential Property (commercial). I already own another Residential Property which is rented.
Query: Can I invest the above Capital Gain gained (from residential and non-residential) into single Residential Property and get tax exemption on Capital Gain.
Mr. Jitendra,
Another aspect is about service tax, required to be agreement specific. Should consult with details an adviser.
Regards,
Mr. Mangesh,
With ref to your earlier post of July 30, seems to be you’re a HNI.
Irrespective, before posting this query of yours have you not read the subsequent posts of Mr.Jitendra Solanki, answering 54F?
Please do read the posts & any further question[s], do revert.
Regards,
i purchased an agriculture land in1997 on rs. 3 lacs. in share with one . which is nt mentioned in my IT returns it was sold in may 2014. in rs. 76 lacs. i hav one resil. house already
nw my ques.
1. may i pur. another house or a land 2 save the tax.??
2. or i can pur. tax. saving bond. ???
Or give ur opinion on the above matter n give ur besides two. above matter.
mobile no. 9425923170
Hi , my father is planning to sell his ancestral property amt 7 cr.
And want to gift half of the amount to his 2 daughter equally . So in that case will he liable to pay LTCG on the amount gifted and please explain the LTCG implication on his daughters too.
Mini,
Gift received by specified blood relatives is exempted from tax irrespective of the gift value. Daughters are very well included in the definition of blood relatives. Read the below article to know more about gift tax..
http://www.jitendrapssolanki.com/2014/04/gifts-tax-pay-exempted.html
The tax liability is always on the owner of the assets and so your father will be liable for capital gains tax.
Mangesh,
As far as clubbing the two section is considered it have been allowed previously through court rulings. So it rest on what view does IT officer takes in your case.But there is a difference in the conditions of Sec 54 & 54F. While Sec 54 allows you to own multiple properties when you are selling existing, Sec 54F does not. Since you already own a residential property, in my view availing Sec 54F will be difficult.
My advise to you is to seek assistance from a good tax expert who will guide you appropriately by looking at your situation more comprehensively. If you need any let me know.
Mr. Jitendra,
This is to inform Ms.Mini, that her father will be gifting sale proceeds, 100% to the two daughters. It’s post sale proceeds.
As you have rightly pointed out the tax liability aspects.
The father has to compute indexation LTCG, invest according to the sec.54 provisions. The difference can be gifted as per gift tax provisions, no questions asked.
The father can re LTCG, buy a resi house with two daughters as joint holders or in any investment. Pre sale gift is different.
Regards,
Hi,
I have bought a Residential independent House in my name in 1998 and recently I have sold that house last month in july 2014. Now I have purchased a Residential independent House in the name of my wife who is a housewife.
My question is that do I or my wife need to pay any capital gain tax?
Regards, Sumit
Sumit,
In the past court rulings have allowed exemptions if new property is purchased in the name of spouse provided the funds have been invested entirely by you. So going with these rulings you should be able to claim exemption even if the house is purchased in the name of spouse.
But do consult a tax expert before claiming the tax exemption.
Dear Sir,
I have a question on tax on capital gain from sale of a residential flat. I had done the legal flat registration (paid govt. stamp duty, got flat number allotted etc.) of the flat in Feb 2008 when 2 floors (out of 18) of the building were complete. I tool bank loan and EMI started. In Oct 2012 when builder got OC, I took the possession of the flat. Now in Aug 2014, I wish to sell the flat. Will the gain be considered as short term or long term gain given that the date of acquisition/allotment/registration was Feb 2008? I have read some articles stating that “Duration of cap gains must be based on date of allotment and not date of possession”. Hence this question.
Thanks in advance for your time and help!
Regards,
DSK.
Just to add: Here’s the text from a relevant article on this subject –
“Recently P&H High Court has held in the case of Mrs. Madhu Kaul Vs. CIT that identification of the flat or physical delivery of possession is irrelevant as right to hold properly stands crystalised upon allotment. The allotment of a particular flat and delivery of its possession would relate back to the allotment. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.
Held by Hon’ble High Court
Admittedly, the flat was allotted to the appellant on 07.06.1986, vide letter conveyed to the assessee on 30.06.1986. The assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold properly on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter. In view of what has been recorded hereinabove, we have no hesitation in holding that the Income Tax Appellate Tribunal has erred in holding that the transaction does not envisage a long term capital gain. Consequently, we allow the appeal, set aside order dated 15.02.1999 and answer the substantial questions of law in favour of the assessee.”
Dear Mr. Solanki,
I’ve sold my residential property on 11.10.2011 and deposited the henceforth amount in CG account scheme in the last month of March 2012 (before the end of the financial year in which the transaction took place). I’ve one more property where I want to add second floor to it. Now,
1. Can I use the money from capital gains savings account to construct a floor over existing property? Would that be considered as acquiring a new asset as I’m not renovating but constructing an entirely new floor and thus should be allowed to use the sum deposited in capital gains account scheme towards the construction of a new floor on already established property?
2. After taking due permission from the concerned authorities, would it be alright if I withdraw and use all the money for acquiring the construction material and making contract payments, however, finishing the construction and receive the occupation certificate after 10.10.2014 (i.e., after completion of three years from the sale of property)? In a nutshell, do I need to get the completion certificate before end date of 3 years from sale to qualify for a valid investment of capital amount?
3. During construction apart from construction material, I would be needed to employ some labour and thus provide them their fees in cash. So how can I show the bills for labour cost? Using a normal voucher book from market and getting their thumb/signature against the paid sum would suffice?
I appreciate for your time and help.
Regards,
Sumit
Thanks Jitendra Ji for the prompt reply! It will help me while talking to the Tax Expert.
Mr. Sumit,
The construction of new house has to be completed within three years, you are aware of the provisions.
DSK,
It seems you have not read the earlier posts in respect of allotment v. LTCG claim ON SALE vis-a-vis LTCG [invest] benefit upheld on allotment.
It will be STCG. Prefer an expert opinion, if you want.
BTW, the case laws cited by you have been mentioned by Mr.Jitendra Slanki in details.
Regards,
Mr. Joshi,
Thank you for your time and help but no thank you. You shouldn’t intrude in the comments/queries not meant for you. You can derive the pleasure of answering and feeling important at some other blog but stay out of the queries not addressed to you. Second, read your reply and my query, it may tell you about your shallow knowledge on the subject as i asked for construction of a new asset not a new house (both are different).
Dear Mr. Solanki,
I’ve sold my residential property on 11.10.2011 and deposited the henceforth amount in CG account scheme in the last month of March 2012 (before the end of the financial year in which the transaction took place). I’ve one more property where I want to add second floor to it. Now,
1. Can I use the money from capital gains savings account to construct a floor over existing property? Would that be considered as acquiring a new asset as I’m not renovating but constructing an entirely new floor and thus should be allowed to use the sum deposited in capital gains account scheme towards the construction of a new floor on already established property?
2. After taking due permission from the concerned authorities, would it be alright if I withdraw and use all the money for acquiring the construction material and making contract payments, however, finishing the construction and receive the occupation certificate after 10.10.2014 (i.e., after completion of three years from the sale of property)? In a nutshell, do I need to get the completion certificate before end date of 3 years from sale to qualify for a valid investment of capital amount?
3. During construction apart from construction material, I would be needed to employ some labour and thus provide them their fees in cash. So how can I show the bills for labour cost? Using a normal voucher book from market and getting their thumb/signature against the paid sum would suffice?
Please accept my apologies for reposting the query as some dummy head answered the query addressed to you.
I appreciate for your time and help.
Regards,
Sumit
Sumit,
I can answer your query by referring to a previous court case of Madras High Court in Commissioner Of Income Tax. vs P. V. Narasimhan 181 ITR 101. Here Madras High Court have referred to other two cases of Gujarat high court and Delhi high court in ruling that investment of sale proceeds from your existing property in constructing a new house on floor of existing residential house is eligible exemption under sec 54. Going by this ruling you should be able to claim the exemption. You can read more about this case in details and see if the situation matches with your query.
With respect to your other query on completion, yes you should have some proof for which completion certificate should suffice. The construction should not go beyond three years from the date of selling your existing property.
Labour and Material Purchase cost-They are included as it is part of the house construction. How you show it is a query which a good tax expert can answer as I am not aware of it.
I hope this gives you some answers to your query. Do consult a tax expert to get the exact picture of you going ahead with utilization of money.
Dear Vinay,
You are doing great by answering queries of readers of this blog and i highly appreciate it. But kindly reply humbly to the queries and avoid any kinds of remarks to any reader. The objective of this blog is to assist readers in finding some solution to their financial issues and lets stick to it.
Dear Mr. Solanki,
My Father has sold his flat this year 2014 (it was purchased in 1960) and the amount is put into LTCG account.
We would like to purchase a flat jointly, with me(his son) as the first name and his name as a second.
a) if he invest the full amount in this flat with both our name(mine first and then his) can he get tax benefit on the full amount, even if I have a NIL investment in this flat
b) if he invest the full amount and I invest the balance part, can he still get tax benefit on his full amount
c) is there a specific point in time or a minimum waiting period where he can gift his part to me and I would own the full flat without paying stamp duty + registration by means of a Gift
Please advise
Thanks
Dear Mr. Solanki,
As I’ve understood by your reply, it is imperative to have occupation certificate within 3 years of transfer, thus you’ve answered the major part of my query. The rest I’ll check out.
Once again, I appreciate your time and help in the matter.
Regards,
Sumit
Dear Mr Solanki,
My query is regarding Short Term Capital Gains on sale of property.Please advise if sale is within 3 years of possession and bank loan has been availed for its purchase,then can the interest paid be added to cost of acquisition, for calculating STCG.Principal and interest payment is way above 80 C and 24(b) limit.I read about a case,attached below,which is similar to my query but relates to LTCG.However,my question is can the below logic be applied to my case.
Qte//
Recently, the Chennai Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Shri C Ramabrahmam1 (the taxpayer) held that the interest paid on the loan taken for acquiring a house is deductible when computing the capital gains arising to the taxpayer on the sale of the house, despite it being already allowed as a deduction while computing income from house property. The computation provisions under the relevant heads of income – i.e. ‘Income from house property’ and ‘capital gains’, are different and the taxpayer was not prevented from claiming that the interest on housing loan as part of the ‘cost of acquisition’ while determining the taxable capital gains.
//Unqte
Mr.Sumit,
Thanx.
Regards
Mr. Jitendra P.S Solanki,
KINDLY EXPLAIN TO ME IN WHICH MANNER I’VE DISPARAGED ANY RESPECTED PERSON? GIVE ME INSTANCES! IF YOU CAN?
By asking those who post their queries w/o reading the earlier posts? or questioning the queries of 1Kcr development?
OR BY STATING THAT SEC.54 LTCG MANDATES, CONSTRUCTING A HOUSE! OR if someone can’t comprehend that an immovable property is an asset, constructed!?
FYI, CC/OC all manageable aspects not considered, technicality is, FIRST PROPERTY assessment date & tax[es] levied.
In the event of scrutiny, cash expenses v. CG a/c compared with earlier returns filed.
ANOTHER ASPECT ARISES —– who am i to intrude?!
So better to be aloof from all questionings.
As a professional, putting up challenging posts – JUST FOR THE BENEFIT FOR PEOPLE POSTING TO UNDERSTAND. THEIR ADVISERS MAY NOT BE ABLE TO ANSWER IN DEFINITIVE.
You are doing a social good, i thought why not participate?
I just wanted to support you, or else why should i waste my time? As i’m preoccupied at times i even post in the wee hours!
ONLY FOR THE BENEFIT TO FURTHER YOUR SOCIAL OBJECTIVE.
Mr. Jitendra YOU HAD TO yourself CLARIFY TO ME on proposed sec 54 LTCG investment, invest in P&M, STATING IT WAS QUASHED!
Mr. Jitendra, i may write to you a personal msg separately but this puts up things straight forward. [You may have preferred to write to me a separate msg.]
There are TV channels who make a showpiece of answering taxation queries. The queries are are filtered & ALL can’t expect answers. Further, THE EXPERTS ARE PAID TO APPEAR ON THE CHANNEL.
So in a way to help the society at large, to help others, your motif i uphold & you should do your best. I’ve always appreciated it.
I put up aspects in layman’s language.
Regards,
P.S. —I do not hold any grudge, whatsoever, be clear of this fundamental aspects.
Vinay,
I feel there is always a scope for improvement in all of us and lets not go into argument when there is a great deal of good job being done. It was a request made to you from me to avoid any remarks while answering the queries.
I hope you take this request in a good spirit and keep enjoying the good work. Whatever efforts are being put by you at my blog are highly appreciable and commendable.
Karlton,
There has been a High Court ruling in which exemption was allowed to thee assesse for investing capital gains in a joint property with spouse considering the entire investment was sourced from the sale proceeds. The High Court has mentioned a statement that “the word “assesse” must be given a wide and liberal interpretation so as to include his legal heirs also. Without the liberal interpretation, the object of granting the exemption would get frustrated.”
In my view your father should be able to claim it provided the house is bought only from his funds. If you decide to invest partly then the exemption may not be allowed as per the understanding of the court ruling.
These are my views and so do consult a tax expert for clarification on this aspect.
On your other query for claiming the exemption he need to own the house for three years after which he can sell it or gift the property to you. Do remember that gifting to family members does not avoid stamp duty which will still be payable but at a lower rate.
Thanks for the reply Jitendra.
With regards to point b, the only reason I would have to invest in the flat is that in spite of investing the full amount from his LTCG account, it does not complete the value of the flat.
In this case, does he have to arrange for additional funds to pay for the flat to gain a exemption or
I could pay the deficit and he could still claim the exemption.
Can you shed some light on this?
Karlton,
I am not very sure on availing the exemption if you also invest in the property. The exemptions by court have been allowed in joint names but on properties where only the assesse has invested. In my view assesse sourcing additional funds for the property should not be an issue for claiming the capital gains exemption. But for property where both joint owners invest the funds, you will have to get this clarification from a tax expert.
Mr. Jitendra,
I’ll address Karltons three points in a definitive aspects as under – ref his post of 19th & seconding your posts.
1] Yes, first name no aspect. Complete exemption.
2] YES. IT CAN BE PARTLY FUNDED & FATHER CAN PARTLY FUND. THE EXEMPTION IS LIMITED TO THE EXTENT OF INVESTMENT. 100% LTCG, 100% exemption.
THE TWO CAN BE JOINT OWNERS OF THE PROPERTY.
Further, with LTCG funds [invest] one can even buy a property with third party jointly.
3] If as joint owner the quest of gift is diff. The father can gift the amount lying in CG a/c. 2% gift tax, even otherwise on gift of flat.
Alternatively [if not joint holders] the flat can be bequeathed by virtue of a will. No taxes.
Further the flat EVEN if in single name can be gifted the same day, no necessity of 36mnths holding. Subject to gift tax. The stamp duty & registration charges already borne. [hence not advisable]
Further Mr.Jitendra, why first class heir apparent joint funding MAY NOT BE ALLOWED?! Explain to me.
Regards,
Vinay,
Firstly on gifting the house. My view arises on condition of Sec 54 or 54F mentioning that you cannot transfer the house within three years of acquisition else capital gains will be taxable. Now whether gifting of property is regarded as transfer and i s it treated differently in both these sections is something which tax experts can look in detail. In my view it may be considered as transfer. You can quote relevant sections, or any ruling which exempt this transaction.
Secondly on claiming exemption in joint names yes it is allowed but I was not very clear on joint funding. But reading the case of CIT v. Ravinder Kumar Arora 342 ITR 38 it should be allowed to the extent of the amount invested. So if invested fully then complete exemption should be allowed.
karlton,
To make it more clear I am giving you insight of another case of a joint property-
http://www.jitendrapssolanki.com/wp-content/uploads/2014/08/Joint-Prop.pdf
It seems your father will be able to claim the tax benefit even if you invest in the property considering you are the legal heir. However, these are my views and interpretation so do consult a tax expert.
Suman,
There have been many cases regarding this aspect and its still unclear. Although in Chennai Tribunal ruling and others cases such as CIT and ITO v Hariram Hotels (P) Ltd. (2010) 229 CTR 455 (Kar), CIT v Mithilesh Kumari (1973) 92 ITR 9 (Del), the double benefit have been allowed, there has been a case in Karnatak high court CIT v Maithreyi Pai (1985) 152 ITR 247 (Kar) where the court observation are as below-
“Mr. Bhat, however, submitted that section 48 should be examined independently without reference to section 57. Section 48 provides for deducting from the full value of consideration received the cost of acquisition of the capital asset and the cost of improvements, if any. The interest paid on borrowings for the acquisition of a capital asset must fall for deduction under section 48. But, if the same sum is already the subject-matter of deduction under other heads like those under section 57, we cannot understand how it could find place again for the purpose of computation under section 48. No assessee under the scheme of the I.T. Act could be allowed deduction of the same amount is already allowed under twice over. We are firmly of the opinion that if an amount is already allowed under section 57 while computing the income of the assessee, the same cannot be allowed as deduction for the purpose of computing the “capital gains” under section 48.”
So its a debatable issue and there is no clear answer to it. The Chennai Tribunal ruling is the recent one but if accepted then it may throw up cases for more such exemptions or taxation.
In my view there is a higher probability that the assessing officer may not allow the double benefit. You will have to speak to a very good tax expert to seek assistance on this issue.
DSK,
Thee case you have mentioned pertains to delay from the builder on giving the possession of the house which cannot be set ground for denying capital gains exemption where the construction of house has to be completed within three years. So this was a case of capital gains exemption and not for deriving long term capital gains.
Now for deriving long term capital gains in an under construction property the date of calculation differs when sold under construction or after possession. If you have received the possession then the long term capital gains are derived by taking the possession date whereas if you sell it under construction then LTCG is derived from the date of agreement. So effectively in your case LTCG will be calculated from date of possession which means you need to complete three years to get the LTCG benefit.
Mr. Jitendra,
You are clear on joint funding now.
First let me clear your doubt on 54F. 54F[3] states, if transferred within three years from date of construction, exemption is taxable.
54F[3] applies only to constructed house.
If the said house is not complete, it can be gifted!? Esp, if the land is already gifted. 2[42A], 55[2][b][ii] to be read.
Also consider the provisions of sec 45, taxability read with sec47.
Further in respect of sec54.
No provision[s] restricts relinquishing title, its only sale v. LTCG.
The plain reading of the section – exemption will stand withdrawn “IF SOLD”, — not when gifted to a relative – “THAT TOO W/O CONSIDERATION”!
There are no restrictions in the statute, nowhere 54 specifies it or IT CAN BE CONSTRUED / INTERPRETED TO MEAN IT!
I.Tax Dept. considers as exempted from “BEING TREATED AS TRANSFER”, clearly mentioning ‘gift/will’.
2[47] defines transfer.
My aspect was & is – which assesse will transfer [GIFT] the flat, whether partly/fully LTCG invested, having paid stamp duty & registration charges & OVER & ABOVE THAT FURTHER PAY GIFT TAX!? Esp, in the case of transfer to a joint holder.
Regards,
Vinay,
Thanks for these clarifications and i am sure readers will be taking note of it.
Dear Mr. Solanki,
i have sold my ancestral agricultural land from which i have earned good money, but from that money i have started new business other than farming. Do i need to pay capital gain tax for that??
Thanking you.
Dear Mr. Solanki,
Sorry would like to detail you more.
i have sold my 30 years old ancestral agricultural land from which i have earned good money, from that money i have started new business other than farming, and i have not purchased any land against that money yet. Do i need to pay capital gain tax for that?? or would i get any exemption from capital gain taxes??
Thanking you.
Devendra,
Agricultural land in some specified situations is not treated as capital asset and so the capital gains income is exempted. There are two conditions attached to it:
1.It should not be situated within 8 kms of municipal area
2. The population of area (village or municipal) should not be more than 10000.
You can go through the detailed section 2(14)(iii) of Income Tax to know the above two conditions in detail.
If your agricultural land does not satisfy any of the above condition then it will be treated as capital assets and capital gains will be taxed. You cannot save this capital gains tax by investing in a business.
So check the two conditions to verify about the taxability of gains from your agricultural land.
Dear Sir,
A house property is owned by Mrs. A via Will of Mr. B in 1975 and now Mrs. A wants to sell the property. There would be implications of Long Term Capital Gains Tax.
Now the question is to save Long Term Capital Gain Tax if the consideration received by Mrs. A is gifted to Mrs. B, daughter of Mrs. A and she invests the same in house property then will Long Term Capital Gain would be exempted in hands of Mrs. A
Bhavik,
There is no provision of income tax for saving long term capital gains through gifting. The tax liability is on the assesse who owns the property and in your case its Mrs A. So she is liable to pay the capital gains tax for which she needs to invest it in a new property. Now she may still claim the exemption if property is invested in her daughters name by her as few court rulings in the past has allowed if invested in legal heirs name. But she cannot gift the proceeds till she fulfills her tax liability.
Hi,
I have booked an apartment in Dec 2013 in my and husbands name with a bank loan. This flat will be ready in Dec 2016.
There is a plot of land jointly owned by me , my mother , brother and sister(passed on by dad after his death). We want to sell this land and the proceeds will be given to me as per our internal understanding, which I would like to use for my apartment. I have few questions on this wrt tax implications:
1> If the land is sold after december 2014 can I park it in CG account and pay the builder from this account as I get the demand note? What if the property is not ready by dec 2016? Will there be any issues if handover is delayed?
2>Since I am also a joint owner of property, if i use the entire money towards payment of this apartment, will i get total exemption from CG tax or will joint ownership cause any issue as my mother and siblings are also owners of this plot.
Dear Mr .Solanki,
I have made an advance payment to the builder for booking a residential flat in the month of July 2014. Letter of allotment shall be done at some future date.
I have also collected earnest money for a residential flat sold by me. Agreement for sale shall be executed in the month of September 2014 when i will receive full and final payment.
I would like to know the following:
1. Can i claim exemption of the amount paid as advance U/s 54?
2. What is the amount that i need to deposit in the Cpaital Gain Deposit Scheme?
Regards and Thanks
Hemang Marfatia
In May 2011, we sold a flat in Mumbai (held jointly with my husband) and invested the entire proceeds to purchase (also in joint names) a flat in Kolkata in July 2011 . My husband happens to also be the co-owner of an ancestral residential house in Kolkata. Please advise if the sale proceeds of the Mumbai flat is eligible for Capital Gains exemption u/s 54 of IT regulations. Please be informed that the said flat in Mumbai was purchased in the year 1992.
Madhumita,
Exemption on long term capital gains from residential houses fall Under Sec 54. In this section there is no restriction on number of properties you hold on the date of transfer or after it. You can claim the exemption even if you have an ownership in other properties. So your gains from the flat in Mumbai will be eligible for capital gains.
Do consult a tax expert while filing for the exemption.
Dear Mr Solanki
Thank you for replying.Sorry to bother you again but i am not seeking double benefit.Since i have an NRI tax status,i have not availed deduction of the principal and interest paid on the housing loan under Section 80C or 24(b) on my Indian income.Though sale price of flat has increased,which was bought around 1.5 years back,real gain is minimal if i add interest paid on home loan to purchase price for the said flat.I want to sell this flat and invest in a new residential flat.So please confirm if i can add interest paid on home loan added to cost of acquisition.As per your illustration case of Mr Bhatt,it appears to be.
Mr. Jitendra,
Yes the assesse[s] entitled for the said 54 benefits.
The aspect is where returns filed, jurisdiction.
Assuming taken care of that, the returns should have been filed by July 31, 2011.
Regards,
Madhumita,
I missed this aspect as rightly pointed out by Vinay. The exemption you are enquiring must have been taken in 2012 i.e. the assessment year for the financial year when the gains arises. You cannot avail it after more than two years of the transaction.
Suman,
If we go by the previous court cases then yes the interest on home loan is allowed for adding as a cost of acquisition especially if you are not claiming under Sec 24(b).
I am giving reference for one more case of ‘CIT vs. Mithileshkumari’ 92 ITR 9 (Delhi), wherein the High Court had occasion to consider a case where a lady taxpayer had raised a loan from her mother-in-law for acquiring a land. When she sold the land she included the amount paid towards interest on loan in the actual cost and disclosed the remaining amount as capital gain on sale of land. The Assessing Officer held that amount paid towards interest could not be added to the cost of the land. The Delhi High Court held that it would be reasonable, to include in the actual cost of the capital asset all expenses which were incurred by the taxpayer in acquiring the capital asset as distinct from the items of expenditure which were incurred for retaining or maintaining the capital asset. The fact that the amount of loan was paid by the taxpayer to the vendor for acquiring the land and that the amount of interest was paid to a different person, namely, her mother-in-law, did not make any difference so far as the taxpayer was concerned in respect of the actual cost of the land to her. It would not also make any difference whether the interest was paid on the date of the purchase or whether it was paid subsequently. Therefore, the taxpayer was justified in adding the interest amount towards the actual cost of the land, for purposes of computation of capital gains.”
But remember that this is a much debatable issue due to double benefit. Considering you haven’t claim for sec 24(b) your claim stand strongly for adding it as cost of acquisition. Still you should take assistance from a tax expert as the Tax Official assessing your case may take a different view.
Dear sir,
Please help,
1. I was an original member of CGHS in dwarka. I got the share certificate in 2003.
2. I paid 6.5 lakhs in 2003 and 6 lakhs loan in 2003. Paid another 2 lakhs over a period till 2009 when I got possession of the house.
3. I sold this house in aug 2014. Paid for loan amount of 4.2 lakhs. Freehold expenses 82000 rs.Sold house for 75 lakhs.
4. I purchased a flat in july 2014 for 60 lakhs plus expdr on IFMS, club charges, service tax, registry came as 70lakhs. 20lakhs paid by me from my funds an savings. 50lakh loan.
4. Booked 4 small plots and 2 studio appartments and a commercial for approx 45 lakhs.
5. Now my query
A. LTCG will be calculated by taking 2003 or 2009.
B. can I show my payment towards new house to save TAX. If yes will it be entire 20 lakhs or less And can I pay tax on bal LTCG.
C. Since 30 aug 2014 the amount 75lakhs is in my savings account, if I pay taxes is it necessary to put it in CGAS account.
D. S it ok to invest in various property with the from the balance amount.
Request answer to each query point wise so that it is easy to comprehend. Thanks and regards
Mr. Jitendra,
The recent ruling of Madras HC, the first post the enactment of the Finance Bill, 2014, into an Act, is clear that no retrospective tax effect of new capital gains rule.
The said secs of 54, will be effective only after April 1, 2014, the court verdict.
Hence, can’t apply to pending cases.
It cleared an assesses [taxpayer] liability position, – ‘that a residential house’, would include multiple flats or residential houses. The restrictive provisions introduced in the IT-Act.
[the explanatory memorandum to the Finance Bill 2014 had contained the provisions.]
The case of the assessee [taxpayer], Ms.V.R Karpagam’s & this judgement by the Hon’ble HC.
The assessee [taxpayer] under a land development agreement with a developer was to receive 43.75% of the built up area post development. [say five flats, translated area.] The assessee [taxpayer] had claimed exemption as 54F of the IT-Act, on the value of those five flats. So the assessee [taxpayer] stated, no taxable gains post claiming this exemption for FY2006-07.
But wef April 1, 2014, AY 2014-15 this can’t be the case & sec.54F will prevail.
Regards,
Mr. Jitendra,
Gift of capital gains is allowed as well immovable property proceeds, ref my post of August 24,2014.
However as you have rightly stated the tax liability will be on the donor. No WAY LTCG 54 can be saved, by gifting.
Regards,
Mr. Jitendra,
Even if the assesse has not filed returns, can file now.
As the entire sale proceeds were invested the CG tax liability [LTCG] on this sale is invested.
So no LTCG tax liability due [barring other tax aspects, if any].
For the last 6-7 yrs IT -PAN transfers are tracked.
The sale proceeds in Bombay may have been deposited in S/B a/c, auto trigger under AIR, tho’ the bank may have casually asked, amount deposit.
It’s advisable in my view the assesse files returns immediately, no tax dues, no penalties, can’t c/f any losses etc.
Regards,
Mr. Jitendra,
You can advise the respected assesse who has posted that sec 54, one year prior to sale the investment is as per 54.
In respect of the second question, indexation defines the value of property & accordingly CG. In the event pre 1981, valuation from a recognized govt. valuer to determine CG.
That CG should be deposited in the CG a/c within six months from the date of sale.
Regards,
Regards,
Mr. Jitendra,
You may advise the respected person so as to state that the cordial aspects & relationship can only be in the family, the legality, the documents & investors source[s] of funds counts.
First 54F, joint ownership issue as they already have their own houses. [assumed as no specifics.]
Required to determine that sale of plot proceeds invested by the assessee & to exempt other assesses from taxation.
54F, CG a/c proceeds in the name[s] of the a/c established, exempt. All mandatory required.
In the event of delayed possession can rely on court cases as enumerated by you, allotment & delays, the courts have always held the LTCG investors not in the wrong & benefits allowed.
Regards,
Sir request answer my query also. Thanx regard. One more input that the new house is jointly on me and wifes name. Hope that does not effect my savings of capital gain.kind of you.
Hi Jitendra,
Can you please reply to my query. Would be of great help.
Thanks
Suchitra
Sir anything?
Suchitra,
Although Vinay has answered your queries here is my clarification-
1, Firstly selling of any asset apart from residential house fall under sec 54F. Here you have a specific condition that on the date of selling your asset you should not be holding any other property apart from the new one on which you are going to claim exemption. Simply put this section does not allow multiple properties. In your case if you have ownership only in the house under construction you should be able to claim exemption. Also, previous court cases has ruled that construction can start before the selling date but should be completed within two years from this date. However, the only issue to tackle is joint ownership wherein the land had multiple owners and your house is also in joint ownership. So the onus on proving the funds received from selling of land invested in house lies on you.
2. If builder delays the construction then you get relief from previous court ruling where exemption have been granted in such situations as investors is not in default..
Even though i have put forward my views its wiser to take assistance of a tax expert due to this multiple ownership issue.
KY Singh,
1. LTCG is calculated by taking total cost of acquisition. In general when you get the possession of a constructed house LTCG is calculated from date of possession. Even then you have sold it after 3 years so shouldn’t be a worry factor for you.
2. Coming to the capital gains exemption on the house you purchased before selling, Sec 54/54F allows buying a new property within 1 year before selling date so should not be an issue. Although there is a new provision in Budget 2014 which states that for claiming sec 54/54F exemption amount should be invested only in one residential property, it is applicable from 1st April 2015. However you have purchased multiple properties within a short span of time wherein you have borrowed funds also. So proving one specific property for exemption, onus will be on you. In my view you may face an opposite view from taxman.
3. If you are paying tax on CG then no need to deposit in CGAS account.
4. If you are investing after paying capital gains tax there is no rule which stops you as you have already paid the required amount of tax to the government. Its your money then and at your discretion to utilize.
Having said all this I will advise you to take help of a Tax Expert since yours is a case of multiple properties within the same period and need more clarification on claiming for exemption.
Hemang,
1. As Vinay has rightly said the exemption is available on residential house under construction even if it started before selling date. This fact comes from a previous court ruling.
2. Any amount of Capital Gains which remains unutilized should be deposited in the CGAS account. So its the Capital Gains which you need to deposit not the entire sale proceeds.
I hope this answer your query. But do not forget to still take advise from a tax expert when you are finally claiming for the exemption.
Sir,
1. I have got no possession of any property except the house for which I have taken loan.
2. All other possessions will be either next yr or 2016.
3. So as u said they will be only mine when I take possession.
4. My one query missed out isthat for thetax exemption are charges paid like IFMS, PLC, Service tax , club charges count.
5. Thank you very much sir for your guidance
Dear Sir,
I have sold one flat on 17/05/2012 capital gain for which was Rs. 20 lacs and purchased new flat on 5/12/2012 for Rs. 40 lacs.
I have sold another flat on 28/06/2013 capital gain for which was Rs. 10 lacs. Now I want to utilise that Rs. 10 lacs towards payment of final instalment of flat purchased on 5/12/2012. Can I do it so that capital gain on sale of two flats are utilised for purchase on one flat as per above details ?
Please reply at the earliest.
Regards,
N.R.Pandit
Nilax,
Tax benefit on a single flat from selling of multiple flats- yes you can claim it. However, I am not very sure on the transaction you have mentioned. In my view you should be able to claim it. But verify it from a tax expert.
Sir,
My father sold 19 cents of landed property in 2013-14, comprising a residential building at an area of 400 sq.feet, which I have got it from his grand father by a gift deed in 1974 and later on 2007-08, he has constructed a commercial building at an area of 3000 sq.feet at a cost of 25 lacs & compound wall worth Rs.5 lacs borrowed fund from banks. The net sale consideration was Rs.90 lacs bifurcating the value for Land Rs.51 lacs, Res.building Rs.5 lacs and commer.builg Rs.34 lacs in the sale deed. Within one month after the sale of above property, he purchased a new residential property for Rs.33 lacs. Will he has to pay any LTCG tax ? Can I have a computation on it, since one expert advised me to remit tax below 3 lacs. My father has no other residential or otherwise properties in possession. The balance of amount through sale consideration has been utilized for repaying the bank debts. Please guide me.
Sir,
My father sold 19 cents of landed property in 2013-14, comprising a residential building at an area of 400 sq.feet, which he has got it from his grand father by a gift deed in 1974 and later on 2007-08, he has constructed a commercial building at an area of 3000 sq.feet at a cost of 25 lacs & compound wall worth Rs.5 lacs borrowed fund from banks. The net sale consideration was Rs.90 lacs bifurcating the value for Land Rs.51 lacs, Res.building Rs.5 lacs and commer.builg Rs.34 lacs in the sale deed. Within one month after the sale of above property, he purchased a new residential property for Rs.33 lacs. Will he has to pay any LTCG tax ? Can I have a computation on it, since one expert advised me to remit tax below 3 lacs. My father has no other residential or otherwise properties in possession. The balance of amount through sale consideration has been utilized for repaying the bank debts. Please guide me.
Mr. X needs to plan his investments to lower his tax liability for LTCG.
a: Mr. X currently has an ancestral property which he plans to sell and invest in a new residential property (say for Rs. 1 million).
b: Mr. X also has another house jointly in his name for which he is paying loan installments and also getting tax exemption for interest payments.
Will he get exemption under section 54 as per the new amendments brought in by the Finance Bill, 2014; since he clearly has more than one residential property in his name? Should he change his plan of action? If yes, what should be the best way to avail LTCG tax exemption?
Mr. Jitendra,
There are no restrictions u/s 54, as long as 54 provisions are met with. Invested in accordance. Two separate houses at two different location in the country.
The MoFin should come specifically on this, CBDT should issue guidelines to the field formation & taxpayers should not be in a quandary. As they specified 54, LTCG in a single house.
Regards,
N_IIT_R,
In my view the new amendments brought in by The Finance Bill 2014 is with respect to investing the Capital Gains for purchase or construction of new house. It says that you can now invest only in One Residential House and not in Multiple Houses as has been the case previously.
The amendments is as given below:
The provisions of section 54 prior to its amendment proposed in the Finance Bill 2014 introduced today reads as under:
Section 54. (1) Subject to the provisions of sub-section (2), where, in the case of an assesse being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset , being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house,——————————.
The proposed amendment as per clause (22) runs as under-
In section 54 of the Income-tax Act, in sub-section (1), for the words “constructed, a residential house”, the words “constructed, one residential house in India” shall be substituted with effect from the 1st day of April, 2015.
There has been similar amendment to section 54F of the Income-tax Act and the amendment proposed reads as under-
In section 54F of the Income-tax Act, in sub-section (1), for the words “constructed, a residential house”, the words “constructed, one residential house in India” shall be substituted with effect from the 1st day of April, 2015 (clause 24 of the Finance Bill)
…………………
If you read it the amendment is with respect to investing the capital gains proceeds in new residential property. This amendment was made to remove the controversy of investing the amount in more than 1 new residential unit and claim the exemption as one unit. However, the provision of Sec 54/54F w.r.t. holding of n number of properties on the date of selling hasn’t been amended and so as per current provision Under Sec 54 one can hold n number of properties.
This clarification is as per my understanding of the amendment. You can get more details from a tax expert.
Mr. Jitendra,
It is expected that the posted queries veracity ascertained as well the NAME! Well as you have overlooked it!
The Finance Bill 2014 is enacted into law hence no proposed amendments, IT Act secs 54/54F prevail as amended.
The said assesse can get automatic 54 benefits of LTCG invested.
Sec 45 precludes certain provisions of 54/54F.
You have got in 54F, 54F[a][i] – assesse can’t own more than one residential house on the date of transfer, other than the new asset.
Regards,
Mr. Jitendra,
The assesse need not pay any LTCG taxes as long as secs 54/54F are complied with. As per the assesse one contiguous property singly held tho’ bifurcated in sale deed. [advantage pt.]
Regards,
Thanks, Solanki Sir,
I am of the same opinion. There have been many a litigation, concerning the investment of proceeds in more than one property and getting exemption (for all) based on plea of same building, common kitchen, adjacent flats etc., hence I suppose the bill clearly represents the government’s stand on the issue. Yet this is a discouraging step for the much needed investment in infrastructure!
Coming back to my question, few of my learned friends are of the view that this also means that you can now claim exemption for only one property in INDIA! Is there some government agency which can clearly give an authoritative opinion on it?
@Vinay, bro I am an ex-IIT Roorkee student and my name starts with N. ‘Veracity’ is probably not the word you intended to use, for my question was quite precise and dealt with a genuine concern, firmly based on ‘facts’. Get a copy : http://www.snapdeal.com/product/OxfordAdva/26477
Dear Sir,
It would be great if you could help me with the answer to following query:
My Father, a retired person, is selling off a residential flat held in his name for close to 3.5 years in Delhi/NCR.
My father plans to help me with buying a residential flat in Bangalore, with the money that he gets from same of his flat.
In order to save (his) tax liability due to Long-term-capital gain, will it be recommendable if I buy my flat in joint name of myself & my father? I would require to avail home loan also to buy my flat. So, Can I buy this flat in joint name of Myself, My father and My wife. My father will contribute with the amount he receives from the same of his flat AND I & my wife will apply for home loan jointly.
Looking forward to your response.
Rajesh
Hello N_IIT_R,
I very much appreciate your intelligent rebuke but saddened YOU have failed to read the ‘definitive advise’, – – NO CONSULT!?
The said assesse can get automatic 54 benefits of LTCG invested.
Sec 45 precludes certain provisions of 54/54F.
Further it seems you have also not read my post 9/3, Madras HC judgement. Of course the word ‘veracity’, used as legal meaning was defi not your post [it’s specific hence specific was stated by me] but was only the name post.
Pl do get your learned friends to post in this forum as well your tax experts to explain to me- why 54 LTCG benefits CAN’T BE AVAILED BY THE SELLER MR.X? My advise is based on 54, not 54F as YOU should have read in my earlier post to Jitendra.
Mr./Ms. N, in my own spirit & to strengthen the forum my endeavour, efforts to put in several aspects so as to benefit the persons who post.
They require a preliminary/ second opinion. [of course the forum bears no responsibility, tho’ professionally answered. All facts may not be put, somebody had asked for 1KCr. property development, w/o facts! questionable why the forum?]
Many thank Jitendra, for the valued guidance but none have thanked him for this thankless job, he is striving for as well to promote financial literacy. [other spheres.]
Pl appreciate the forum efforts & once again reiterate about veracity – 54 no LTCG aspects – 54F as stated in my earlier post.
Regards,
Mr. Jitendra
Yes. There will be no question of LTCG liability on the part of the seller, the assesse. The joint names no aspect.
Regards,
Hello N_IIT_R,
Further to my above post two imp points missed were that –
1] I put the explanations/reasoning’s or answers in easy to understand language.
2]Last week Mumbai [ITAT] came down heavily on CA tax advisers, as no competent advise!? passed strictures, Bombay Chapter [W.R], ICAI has already taken up the matter.
I myself was running an elect.engg, mfgr co. but had to have inputs from from metallurgy, physics, chemistry, which was got from my campus discussions then stored in my hard disc before the advent & development in s/w.
You go for a professional advise all things have to be abs clear.
Regards,
N_IIT_R,
The Finance Bill 2014 has brought changes w.r.t investing capital gains in multiple properties vis single residential unit. There was no other change which you find mention in Budget 2014.
So the other provisions of Sec 54 & sec 54F remains as it is. If your friends views are otherwise then do ask for reference in the IT Act or Finance Bill 2014. As of now if you read the budget speech also it does not mention any other specific change.
Dear Solanki Sir,
Can I have a clear answer from your end to my query dated 11th sept. 2014 at 5..04 pm, please
Sabu Iazar,
I am not a tax expert and so difficult for me to do calculations in your case as the property involves residential and commercial premises at same land, if i have understood your query.Also it involves a detail assesment of your properties. However, looking at three transactions in your sale, it mainly pertains to sec 54F. Since your father invested in residential property he will be able to claim exemption up to the amount invested and it looks to be much less than the gains earned. So gains which are left unutilized will be liable for capital gains tax. Also under Sec 54F there is a specific formula through which you claim the capital gains exemption benefit.
In my view you should seek calculation from your CA who has advised you to remit tax for a specific amount. He might be right since your sale proceeds is Rs 90 lakh and amount invested in new property is only Rs 33 lakh. If you have utilized the remaining funds to repay debts then it will not be counted for tax exemption. Can you give details on where rest Rs 36 lakh has been utilized?
Sir,
I was sold one CMDA approved Govt land Rs.24,00,000/- but that amount i was deposited in FD in various Banks, if that amount is calculated the Income Tax? Kindly explain the details!
Dear Solanki sir,
Thank you for the clarifications and no doubt, you are doing a great job.
Regards
Mr. Jitendra,
I had already put in 9/13, the assesse can avail 54 or 54F as per option. Also stated that the sale deed specifying bifurcation is advantage pt. Secondly stated a contiguous property sale.
However the assesse has not stated the LTCG under 54&54F, resp as indexed & prior 1981 valuation undertaken by certified valuers for IT purpose.
The land sale approx 8.4K sqf, & commercial bldg sale is 54F, house 54.
The sale proceeds from the said deal will be according to the sale deed as registered.
Out of the sales proceeds [unknown LTCG] 33L invested in a resi house & further an unspecified amount paid towards foreclosure of bank loan. The assesse should ascertain the LTCG.
The assesse should invest entire LTCG 54/54F as per the provisions of the act.
Further, the stated bank loan repaid – amount unknown – LTCG as charged to capital gains as exempt can’t get deduction.
The assesse should determine LTCG, 54F 33L invest should not pose a problem. 54/54F to be followed.
Bank repayment shouldn’t also be a problem.
Once again reiterated that the assesse need not pay any LTCG tax if as per 54/54F invest.
Further as 54F invest the assesse will not be able to buy another house during the complete 36 months holding period of the invest.
Regards,
Mohana,
Any capital gains earned from the property has to be deposited in Capital Gains Account Scheme before filing date of Income Tax Return if you do not intend to utilize it in the designated options within this period. If you do not deposit it in this account you will be liable to pay tax on the capital gains you have earned. This provision is for long term capital gains i.e. if you have held the said investment for more than 3 years. If you have sold before 3 years then you need to pay short term capital gains tax.
Thanx for ur reply Sir.
Sir,
I purchased a plot in 2005. I am selling it now (2014) so that I can buy a plot adjoining my parent’s home. I do not plan to construct a house. Does this mean I have to pay Long-term Capital Gain Tax? The plot I purchsed in 2005 had just coconut trees and plantains (it is in city limits) and the one I am planning to buy is also similar. Will this come under 54B?
Dear Sir,
I was able to open a CGAS account before July 31st, 2014.
But I have one more doubt regarding investing the LTCG which is in my mother’s name.
We are planning to buy a flat. But the cost of the flat is more than the LTCG obtained by my mother. Hence we are planning to apply for a home loan. The new house would be jointly purchased in our names (mother and son). The entire LTCG of my mother would be invested in the new flat and the rest amount would be adjusted through home loan.
In this case, is my mother’s LTCG exepted from tax?
The reason for purchasing the flat jointly is for availing tax benefit under section 80C/24 for myself.
Thanks in advance.
Dear Sir,
Some additional details:
My mother is a house wife and she has no income.
I (son) would be repaying the home loan amount.
Mr. Jitendra,
In which manner have you construed it to be LTCG & advise?
Or in India it’s taken for granted as land deal means LTCG!?
My post removed about veracity was to only emphasize that more details to be called for. What in the event this genuine assessee, to be helped, has LTCL?!
Well 24L, the assessee has, ascertained if gross or LTCG/LTCL?
Of course as rightly advised by you 54F compliance& filing returns.
However just in case the entire LTCG parked in FD’s, the interest if cr. to a/c not withdrawn a ‘small window of hope is there’ as AO’s can be lenient in such aspects towards general segment. [in the past it has been considered 54 lying in a/c.]
The revised returns [if original filed] or new returns required to be filed.
As unknown the transaction details & year But it’s pertinent enough to know & understand that BANK’s are mandated to fwd AIR to IT of such a/c details.
So Jitendra, now let the assessee decide & accordingly base your advice. Never summarize advice w/o facts.
THE PEOPLE WHO POST, SEEK SOLACE IN THE PORTAL ADVICE & PROFESSIONAL ADVICE!
Jitendra, in the event if i had posted the assesses post i would have been back to Square ‘A’, WITH YOUR REPLY, ball in my court. You’ve only thrown the law books & sections on my face making me a culprit. What alternative have you advised?
Await your answer about veracity of post.
This & other portal objectives FOR WHICH YOU’RE STRIVING!
Regards,
Vinay,
A blog is for sharing information and to seek answer to queries or doubts. I am sure readers are benefiting from it and very well understand the need of taking professional advice before making a final decision. Having said that all comments are published by me on this blog so leave veracity aspect to me. If you wish to add your inputs to any query you are most welcome and readers will also benefit from it.But I am more open to a discussion on readers queries which is a healthy way to help blog readers.
Jitendra,
That’s precisely what i’m saying if you’ve read my post.
It should not be “INFRUCTUOUS”. Ok.
As you strive i’m also striving to help your valued blog respondents. But for me it can’t be just a surface query to put in my [UNCALLED FOR] opinion.
You know my aspects of you doing the needful, appreciating your efforts & posting.
So now tell me about my earlier post – in reply to your post – & in which way you had to post this to me.
Answer if LTCG/LTCL ascertained , sale date et al, but advised.
WHAT WAS THE SOLACE TO THE RESPONDENT?
BUT IN MY RESPONSE I’VE GIVEN SOME ALTERNATIVE NOT NECESSARILY MAY BE TAX SAVING IF LTCG/ NON FILING. HAVE YOU COMMENTED ON THIS? Nothing!
Jitendra, as a professional , professional guidance!?
Regards,
Vinay,
If i missed out any part of query and you being an expert if taken note of it then do reply to the specific reader with your inputs so that they can benefit from it. I reply to queries within my expertise and based on the facts in the query asked. The alternative you have suggested may be right but will depend on the readers situation or if i put precisely the actual gains/loss he has derived. Since its a land deal so question of 54 does not arise and in my view the leniency is given by AOs in case of sec 54 more.Also, if the deadline of filing ITR is not missed then the reader has time to transfer the funds to CGAS scheme but if it is missed then tax liability will arise.
Yogeesh,
If the cost of the house is more than or equal to the LTCG then the entire capital gains are exempted. So your mother will get the full exemption on the capital gains.
Dear sir
If i sell my old plot 55yrs old and with the proceedings i construct a house consisting of three portions will i get ltcg benifit.The house will have single door no.I am a bit confused about the benifit for one house only
regards
seshadri
Jitendra,
Tax aspects can be ascertained only on the veracity of the info by the assesse.
One need not profess to be a tax expert but a ‘professional’, financial adviser you are.
In your financial advice you must be considering the risk appetite, asset allocation, liquidity & TAX treatment.
As you’re running a good portal i’ve being putting certain inputs.
Jitendra, if one goes for med examination the GP will diagnose the ailment as per info & symptoms observed.
Anything concealed can’t be wrong diagnosis.
Well in respect of suggesting the alternative – just an alternative – to try the luck.
Yes 54, compliance overlooked as in same AY, the gross sale proceeds were invested in a flat [resi house].
The aspect is how the assesse in present case can comply with 54F?
CGa/c can be established within six months only of sale deed date / bond invest / buy property. So the other alternative of buying property the assesse will be at the mercy of AO & IT dept. or should be prepared to pay 20.6% on LTCG – ONLY- not entire 24L.
The entire facts of the assesse sale transactions unknown to you.
ITR has to be filed as suggested by you on due date! What if not?!
This genuine an assesse requires your ‘FREE’ guidance, pl do respond to the respondent to the e.id.
Regards,
K Sheshadri,
The rules have been changed wherein you can invest only in one residential house property now. The rule is effective from 1st April 2015. What this rule does is that it clears all definition of a residential house as it clearly says one residential house. So like previously buying two seperate units and combining into one will no more be feasible.
I am not sure what you mean by saying three portions. If these are three seperate units then you may be questioned and onus of proving of one residential house lies on you. Difficult for me to give any definite answer. Wiser if you consult a tax expert personally and show him what you want to construct. He can then guide you more appropriately.
Hi Experts,
I have purchased a flat in May 2011 of INR 2,000,000. On which I paid INR 167,000 for registry on my name and INR 200,000 on getting it furnished (I don’t have any bill to prove this INR 200K investement).
In total I have invested INR 2,367,000.
Now I have make up my mind to sell it in INR 44,000,000 (out of which INR 3,800,000 min amount have to be on papers).
Total amount coming under capital gain is approx. INR 1,600,000 (in long term capital gain).
Now this complete amount of INR 3,300,000 (deducting INR 1,100,000 which I have to pay my housing loan).
I want to use in building a house on a plot which is registered under my father’s name 10years back he purchased this plot.
Help required:
Will I get a tax exemption?
Please suggest me the solution, so that I can save my tax.
Thanks
Abhishek
9310005889
Hi Sir,
I am a salaried person. I own a two flats and one commercial shop and a piece of agricultural land.
I want to sell off one of my flat and buy a new residential flat within 3 years from the date of sale.
My Questions:
1. Can I claim tax exemption under 54, since I am holding other properties too?
2. In case I can claim tax under 54, then what do I show to claim tax benefit, since I haven’t bought another flat yet but plan to buy in 3 years?
Appreciate you help
Sanjeev
Mangesh,
A small clarification.
Under sec 54F , you cannot hold more then one residential property exclusive of the property you are claiming exemption. So if you invest in another property apart from the one you have you should be able to claim exemption. However, its the clubbing aspect of Sec 54 & 54F which you need to clarify from tax expert.
Mr. Jitendra,
Three portions!? Secondly selling plot & investment in house construction details are sketchy.
By selling the plot is the assesse buying another plot to construct the house?
If so the assesse can gets benefit as per 54F— IF the said house constructed in stipulated period – stand alone house – on the plot & that THERE WILL NOT BE multiple entrances to determine as portioned / partitioned construction.
In the event a singular stand alone structure constructed on a plot assessed for property tax as a singular structure is allowed. It has to be a singular property irrespective of joint holders.
Further in respect of Finance Bill 2014 enacted into amendments of IT Act are applicable for all FY 2014-15 transactions for AY 2015-16. So no question of rule to be effective April 2015, AY.
Regards,
Mr. Jitendra,
The assesse is well aware of 54B to determine it & sec 45 provisions.
Has the assesse returned any agri income exemption? In the city limits the said sale/purchase will determine the status as per land designation of the revenue authorities.
Regards,
Sanjeev,
1. If you earn capital gains from selling a residential flat you claim exemption under section 54. There is no restriction on holding number of properties and so if you buy another property from the gains you will be able to claim exemption.
2. If there is time in buying a new property then you should deposit the amount in Capital Gains Account Scheme with any of the nationalized bank. Remain invested till you utilize this money for buying the new property. This account you need to disclose in your ITR and then gains will be exempted from tax. But remember that you need to complete the purchase within two years from selling date. For construction its 3 years from date of transfer.
“Any capital gains earned from the property has to be deposited in Capital Gains Account Scheme before filing date of Income Tax Return if you do not intend to utilize it in the designated options within this period.”
Dear Sir, what if I don’t keep the earned long term capital gains in a Capital Gains Account but reinvest the earned capital in a new property before filing date of Income Tax Return? Will I still be liable for long term capital gain tax?
Rishi,
In the statement i have said that if you do not intend to utilize the gains within the stipulated period in the designated options, then its need to be deposited in CGAS. Investing in residential property is one of the options to save capital gains tax and so if you invest in a residential property you won’t be liable to capital gains tax provided the conditions laid down under Sec 54 or 54F are met.
Sanjeev,
1. Selling a residential property is covered under Sec 54 and does not have any restriction on holding n number of properties, so you can claim exemption in new property even if you hold some.
2.Till the time you do not utilize the capital gains deposit it in Capital Gains Account Scheme and show it in your ITR.
Thank you very much Mr. Solanki.
I have related question.
After selling the flat I buy another residential flat that is under construction then:
1. If I don’t get possession with 2 years of time, will I be liable to pay LCGT?
2. After buying a new residential flat, do I have to show anything in income tax return files that I got so and so gain and I have invested in so and so residential property?
Thanks, but if I don’t get possession of the newly bought residential flat then I will be liable to pay taxes, right?
I mean within 2 years if I don’t get possession of the new residential flat I bought then I will have to pay taxes, right?
Jitendra,
Answering the said assesses pt.2 in respect of declaration in ITR for LTCG. During the preceding AY’s [FY’s] the SoP/LoP declaration was there. The sale proceeds to be invested as per 54, within six months in CGAS & accordingly ITR will reflect.
[restrictions under 54F & 54 to be understood. So as not to be wrongly construed as 54F.]
In the event the assesse is not in possession of the under construction flat within the time frame the assesse can plead the genuine intention & investment & thereafter if ITO declines it should be prepared for litigation.
Assuming the assesse has already declared in ITR the LTCG [computation] obviously the ITR filed will state CGAS amount!?
Regards,
Sanjeev,
For purchasing under construction flat Under sec 54/54F, the time horizon for completion is 3 years i.e. it should get completed within three years. Two years is for purchase. If the residential property is not constructed within stipulated time i.e. 3 years then capital gains tax will become payable.
Hello,
Just wanted if we sale old house (30 years old) in and for received amount if we buy a plot in 6 month or in 1 year, are we liable to pay any Tax. Please help.
Thanks!
Rakesh,
There is no exemption available for investing the capital gains in a plot. Necessarily you have to invest it in a Residential house or other options as stipulated in Sec 54/54F. So if you have bought a plot you will be liable to pay capital gains tax.
Dear Sir,
1) I have 2 residential properties in my name and am planning to sell my second flat and invest the proceeds in a different residential property elsewhere to save on capital gains tax. I am planning to gift the newly invested residential flat to my sister through gift deed within 6 months from the date of purchase. I wish to know if there is any time limit before I can gift this newly purchased property to my sister? Will there be any capital gain implications?
2) Alternatively I wish to ask can I sell of my second property and invest in a new property with me and my sister as joint owners? Will it be interferring with any long term capital gains guidelines of section 54? Has the new property to be purchased in my name or joint name is allowed?
In the above scenario, if I am allowed to invest with my sister as joint owner and still be eligible under section 54, what is the time limit that I can transfer my share in the new property to my sister through gift deed?
Hi,
I am planning to sell one of my properties-a flat under construction for the last 5 years and use this money to purchase my brother’s share in inherited property.(flat is not in possession yet)
Would i be subject to capital gains?
would it be any different if the flat were in my posession befor ei dispose it off?
Thanks..
Let me rephrase my earlier question:
I have invested in a flat under construction in NCR.
When my father expired the flat in delhi was transferreed in mother name with mutual consent of us two brothers.
Recentl my mother also expired intestate. Now i want to purchase my bother’s half share and have delhi flat in my name.
I want to sell off my other flat under construction and invest the proceeds in delhi flat by giving the amount to my brother.
Would i be subject to LTCG?
Hi,
I have a situation for which I am seeking a clarification:
I have a 10 year old flat that I want to sell and another new flat that I would like to buy. As the old flat may take some time to find a buyer, I would like to go ahead with the new flat through a bank loan. Once I manage to sell off the old flat, can I use the capital gains amount to foreclose the bank loan ?
I would be much obliged if you could clarify.
Hi,
I sold my flat within three years of purchase. I have some gain on it.
I am buying a new flat and want to invest my cash and gain amount towards new flat.
Will it be possible , will my gain amount be exempted from tax?
Archana,
For long term capital gains minimum three years holding is required. If you have sold it before 3 years then it is treated as short term gains which is added to your income and taxable. There is no exemption on short term capital gains.
Prabhat,
The first consideration in your case is your mother dying intestate. In such instance the distribution is as per Hindu Succession Act 1956, according to which In case of Hindu Woman her husband and children have first right and equal share in the property. So in your case you and your brother have equal share.
Now you can buy your brother share from the property.
In my view co-owner buying share of other co-owner should be treated as purchase and should be exempted under sec 54 as referred from case of CIT v TN Aravinda Reddy (1979) 120 ITR 46 (SC). But I am not very clear on this when it is an inherited property.
You will have to seek guidance from a good tax expert to get a clear picture.
Shivakumar,
In my view If you are utilizing the proceeds to foreclose the loan of the property you are claiming as exemption you will be entitled to claim the exemption under Sec 54.
Still take opinion of a tax expert before you make a decision.
Dear Mr.Solanki
I have house bought in chennai in 2003 ( which is let out ) and sold in Feb’ 2013, which is let out. Earned Long term capital gain against the sale of house. In Feb 2014 purchased a new house in Hyderabad. During the period Feb2013-Feb2014 I have kept the House sale proceeds in Andhar Bank under LTCG a/c. Now , while filing IT returns for the Asst.year 2014-15 I have following doubts.
1. Which ITR form to file ( previously ITR-1 Form filed under e-filing ) now for claiming LTCG
2. How to claim benefits under LTCG. As I have invested (with purshase of new house, which is also let out ) within one year from sale of house
3. Due to my workpalce, always I am away and paying rent
Pls. advice
I have finalized sale of a flat in Oct 2014 that will result in LTCG to the tune of Rs. 1 Cr. Apart from the flat that I am selling, I own two more flats, one of which is self-occupied and the other rented. Questions:
1. Can I avail of LTCG exemption by buying a residential property?
2. Can I buy NHAI/REC Bonds worth 50L in FY14-15 and another 50L in FY15-16 and get exemption for 1 Cr.?
3. Is there any other way to save/minimize LTCG?
Anirban,
1. Under sec 54 you can hold multiple properties and so you can claim exemption by buying a new residential property.
2. Capital Gains Bonds has to be purchased within six months of selling your existing flat. Also with budget 2014 provision the investment in these bonds have been restricted to Rs 50 lakh. So you can invest upto this amount within six months.
3. Apart from these two benefits there is no other investment which can save you LTCG tax on property.
Dhanunjaya,
For claiming capital gains exemption on house property ITR-2 is to be used. If you go through the form it seeks all details on the exemption. You can take assistance of a tax expert if you find difficulty in understanding it.
Hi Sir, have a query on sec 54.
I purchased a residencial flat for 1.8 Cr, agreement registered on 5th sept 2014 & sold my only old flat for 56 lacs, for which agreement was registered on 25th sept 2014. now the entire proceeds from the old flat amounting to 56 lacs was paid as part of the amount for the purchase of the new flat & rest was paid through home loan & personal savings of 10 lacs. so can i claim exemption while filing returns?
Abhijeet,
Under sec 54, you have provision of purchasing a residential property with one year prior to selling date. So you can claim exemption on your transaction since they are within the stipulated time as stated in Sec 54.
Dear sir
We have two flats in delhi. One is my name another in my husbands name. Now we are planning to buy a house in Delhi in joint name. We are taking a loan from bank which we plan to settle by selling the flat that is in my husbands name. Will we. Be eligible for LTCG exemption.
Please guide. Thanks a lot in advance.
Sir if buy a property in Nov 2014 taking loan from bank and then i want to sell another flat in same city to settle the loan. Will I have sell the flay by Oct 2015 or before Mar 2015 or by date of filing the retun ( 31 July 2015) to save LTCG tax. Please claryfy, thanks
Roopa,
Within my understanding the time horizon of purchase of new property on which you are claiming exemption is calculated from the date of selling your existing flat. So if it is purchased before then one year should be taken from the date of transfer of existing flat which means the transfer should have been completed by Oct 2015.
But do to take a view from a tax expert.
Roopa,
Yes with reference to various court rulings even if you buy a house in joint name your husband will be able to avail the exemption. However, do remember that any source of fund from your end may not be counted for exemption. So if you are availing a joint loan bear this aspect in mind.
Thanks sir. One more question, how much time is given to deposit the TDS (1% of flat cost). I am buying the flat in Nov 2014. Upto what time I can deposite the TDS ( deducted from seller’s amount)
Hello Jitendra,
Belated Deepavali & New Year wishes.
Ms. Roopa can be advised as under;
The new amendment rules specifically state that the amount of tax deducted at source consequent to payment on transfer of certain immovable property in terms of section 194 IA of the Income-tax Act, 1961 shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made.
It further provides that the payment shall be accompanied by a challan-cum statement in Form No. 26QB.
The certificate in form 16B shall be issued by the [purchaser] deductor to the seller. In the event the seller has no PAN, deduction will be 20%. Buyer need not have TAN.
Both parties should essentially have PAN.
Regards,
Hi Vinay,
Wish you too had a colorful Deepavali with your loved ones.
Thanks for the valuable input.
Dear Mr. Solanki,
Thanks for running such a nice blog that is helping many people. Here is my question:
I bought a resale residential apartment that was under construction in Feb, 2011. The allotment was transferred in my name in the books of the builder and I was issued the fresh allotment. In 2014, after 3 years of this transaction and before taking possession, I sold this property. Considering that I never took possession of this residential property, will the gain from this transaction considered as LTCG or income in the current FY?
Hi Jitendra,
I have long term capital gains on sale of unlisted shares in May’14. I had booked a flat in Jan 2013. Registration in Feb 13 and took possession in June 2014. OC is yet to come. The payment was done from a loan taken from a bank on completion of stages. Would i be eligible for benefit u/s 54F. Your response would be highly appreciated. Thanks
Mamta
Anirban,
Prima facie if you are selling any property while under construction then as per my understanding you are eligible for long term capital gains tax exemption.Once you have taken the possession then the LTCG calculation starts from that date. The reason given by various tax experts is that during under construction you do not own the property but have a “right to buy”. As you receive the possession this right to buy is finally converted to ownership of th eproperty. These two situation vary and so the calculation of LTCG.
Still I am not a tax expert and only resting my views on basis of information you have provided and my understanding. Take guidance from a tax expert who will clarify your situation by actually going through your documents.
Sir,
I sold my house in 2014 for 2crores. I had paid tax while registering the property. I had purchased it in the year 2000 for 25lakhs and I had done interiors like wardrobe , cupboards etc for another 10lakhs. So the total cost price is say 35 lakhs.
Now I have purchased a flat with this for 2.5crores.
Please let me know how do I calculate the capital gain and how do I avoid paying income tax .
Ansuya,
Firstly you do not avoid paying tax but get relief from income tax. Both words have different meanings and repercussions.
Coming to your query any expense you have made on the house will be added to the cost of house.
Read the below post to know how you derive capital gains tax-
http://www.jitendrapssolanki.com/2014/08/understanding-long-term-and-short-term-capital-gains.html
Dear Mr. Jitendra P.S. Solanki,
Congratulation on a wonderful blog! I had a similar situation. I want to purchase 2 adjoining flats in the same complex from the proceeds of my sale of property. I want to use the CGAS exemption. I wonder if there are any updates on this matter?
Best Regards,
Shan
Dear Sir,
Last year, I sold a residential property after 3 years of buying it and invested the entire sum in another residential property in the same year. Now, if I sell this new property at the cost price and reinvest the entire sum again in an under construction residential property, will there be a tax liability?
Rishi
Shan,
As per budget 2014 provisions you can invest only in one residential property for claiming LTCG tax exemption. This is effective from 1st April 2015. But even then till now various court rulings have allowed buying multiple properties for exemption only if you covert the two into one unit.
In my view avoid multiple properties and invest in one residential property specifically for exemption. Rest, take the view of tax expert also for your situation.
Rishi,
When you invest in a residential property for exemption on capital gains tax, you have to hold the property for t least three years. If you transfer it within three years then you will loose the exemption you have claimed and the capital gains which will arise from this transaction will be taxable.
Thank you for your reply Sir. Does that mean even if one does not want to liquidate the asset but use the proceeds (with zero short term capital gain) for the purpose of buying a different house, due to genuine reasons, tax exemption will be lost?
Hello Jitendra,
You can advise Ms. Anusaya that indexation is as per sale / purchase registered deeds. That is the valuation for determining LTCG/STCG.
Mandatory duties / levies paid computed as deduction from LTCG / STCG as cost of acquiring, nothing else. If brokerage paid & can be proved can be addition to cost of acquiring the said property.
No gold plating allowed u/s 54 & no question of prior 1981 valuation.
If her 100% sale proceeds invested in another house no need to “AVOID” LTCG / taxes. Zero tax. The LTCG computation as per indexation.
To avoid tax there are provisions under 54 BUT not to “EVADE” tax. So is with sec 80 as well with various corporate secs applicable.
IT does not give any relief but stipulates rebate to be adhered to.
Regards,
Hello Jitendra,
You can advise that no exemption can be claimed on sale of unlisted security.
Regards,
In March, 2014 I have booked a residential apartment in joint name of my Son and myself. My son is the first joint owner. Expected date of possession is June, 2016. In Oct, 2014 I have sold an apartment that I solely owned. The sale has resulted in LTCG that is comparable to the price of the new apartment that I have booked. Can I use the new apartment that I have booked in joint name for LTCG Exemption?
Dear Mr. Jitendra & Mr. Joshi,
Request you to refer 54F, which provides Long term capital gains exemption on sale of any Capital asset (not being a residential house), if the net proceeds are invested in purchasing a residential house 1 year before or two years after transfer or 3 years after transfer in case of construction. My query was whether I will get exemption, since I booked the flat in Jan 13 while the possession was obtained in June 2014. The transfer of capital asset (unlisted shares) took place in May 2014. Would date of possession be considered or date of the booking of the flat will be considered for 54F.
Regards
Mamta
Anirban,
Under section 54 you can purchase property within one year prior to the selling date. Your purchase is very well within this rule and so you can claim it for exemption. If the property is under construction it should get completed within three years. Your date of possession is also well within this rule.
Coming to joint ownership various court rulings have allowed it when you purchase with your legal heirs. So in my view you can claim the exemption even if is purchased with your son. Whether your name should appear in first or second, I am not clear on legality. Probably Mr. Vinay can clarify it.
Dear Sir
I have a query on this. I have already bought a flat after taking loan from bank. Now I am selling my old flat and I want to pay back my bank loan from the proceeds. Now the buyer will give me cheque in my name. Cant I deposit this in my saving account and then pay the loan by giving a cheque from my saving account..Thanks
Sir, Can you please clarify this. We are taking a joint loan but I am a housewife. my husband is selling his flat for 80L with a capital gain of 55 L. We are buying a house for 1.24 Cr with loan amount of Rs 1.10 Cr. Will my husband be able to get exemption.
Awaiting your confirmation Sir.
I feel there must be a provision in law or a way around to avoid loss of tax exemption in cases where one is *not liquidating the asset* but using the proceeds only to buy a different residential property for personal use. I can’t see this law serving any purpose, otherwise. A blanket restriction of 3 years for transferring the property against which LTCG tax exmption is claimed, doesn’t seem to help either government or the individual.
Awaiting your confirmation Sir.
I feel there must be a provision in law or a way around to avoid loss of tax exemption in cases where one is *not liquidating the asset* but using the proceeds only to buy a different residential property for personal use. I can’t see this law serving any purpose, otherwise. A blanket restriction of 3 years for transferring the property against which LTCG tax exemption is claimed, doesn’t seem to help either government or the individual.
Rishi,
This rule holds now under sec 54 or 54F. Within my knowledge I haven’t come across any provision wherein this rule does not apply. However, I am not a tax expert and so can’t give you more inputs on income tax provisions. You can get the clarification from a tax expert
Sir when we sell the flat, the cheque will come in our favour. Cant we deposit this in our saving a/c and then pay the bank for settling the loan. Or we will have to open captial gain account first and deposit the cheque there.
Hello Mr. Jitendra,
Yes the assessed LTCG derived u/s 54 can be invested in jt. names.
Mr. Anirban as per 54 stipulated provisions invested.
Exempt LTCG irrespective of the order of names in the purchase / title deed. The title to the said property & the said LTCG invested is in compliance. Not necessary 100% interest in the title.
Regards,
Hello Mr. Jitendra,
The assessee sold a property, invested LTCG in new property as per 54, now wants to sell the said invested property to avoid STCG in the first place & LTCG claimed. The LTCG claimed sale is liquidation of the asset.
You’ve rightly stated the sec 54 stipulations.
In the event the assesse has any reservations about the said IT provisions, the views can be posted to FinMin. They have asked for not only from the industry but from tax payers.
Earlier ICAI had asked for views & suggestions on ITR reforms, by Oct,27.
Now FinMin has asked for views & suggestions to be posted before Nov,10.
The views solicited on DIRECT as well INDIRECT taxation, as word document in the form of separate attachment[s].
The suggestions & views may be emailed [Direct Tax] — ustp13@nic.in [indirect tax — budget-cbec@nic.in]
Hard copies of the Pre-Budget proposals/ suggestions relating to Customs & Central Excise may be sent to Shri Alok Shukla, Joint Secretary (TRU-I), and Service Tax to Shri M. Vinod Kumar, Joint Secretary (TRU-II), CBEC.
The suggestions relating to Direct Taxes may be sent to Ms. Pragya S. Saksena, Joint Secretary, Tax Policy and Legislation (TPL-I), CBDT .
It would be appreciated if the views and suggestions reach them by the 10th November 2014.
Regards,
Hello Mr.Jitendra,
As per my earlier post i had made it explicitly clear that no exemption.
Regards,
Hello Mr.Jitendra,
If Ms. Roopa wants to square off the loan to the extent of 80L or even invest LTCG of 55L by squaring off the loan to that extent, LTCG admissible.
However Jitendra it’s not clear about possession from the sale ate & bank stipulated T&C.
The cheque of the sale proceeds can be encashed in S/B.a/c subject to investing LTCG as stipulated.
If not, establish CGAS for LTCG & bank will release payment.
Not essential to establish prior to sale CGAS a/c. Neither required to deposit 100% sale proceeds in CGAS.
Regards,
Mr. Jitendra, would appreciate a response from you on my query.
I do not agree with Mr. Joshi’s views who does not provide any support in his view either under IT or any case law.
Thanks in anticipation,
Mamta
Though it does not solve my immediate problem, I think the initiative taken by Finance Ministry is commendable. Thanks Mr. Jitendra and Mr. Vinay for your inputs. Appreciate your effort to help the community!
Mamta,
First I willpost Mr. vinay reply since he is unable to post..
……………………………..
Hello Mr.Jitendra,
In the first place its assumed that Ms. Mamata has filed her ITR as per 139 [54F[1] & [4] to be read together. What was claimed? Why the question now?
Before answering her i’ll put two points for her to answer – 1] availed bank loan [proportion unknown] – 2] where the sale proceeds were parked?
Its not known if unlisted share sale was ESOP [10[34A] & if so read with 115QA exempt. Valuation as per 55A to determine FMV. [fair market value.] If not so, NA.
The holding period of unlisted secs. not known & 2014 IT.Act , has increased holding period of unlisted share sale to 36mnths for LTCG, tax accordingly, no other provisions. [Even listed securities, STT paid, under buyback/open offer not eligible for any exemption.]
Before referring to any other secs,Chapters of IT Act as amended i would like to know from Ms.Mamata her premise of 54F exemption & what she means by ‘Capital Asset’, other than resi.property.
Her Pvt.Co. would also have had advisers & known intricacies.
Irrespective, not concerned – answer if ‘unlisted shares ‘ can qualify under 54F exemption as per the IT Act, & the stipulations, which can avail 20.6% tax exemption
…………………………………………………………….
Now I put forward my views in addition to Mr. Vinay:
1. Firstly in budget 2014 the holding period for unlisted shares has been increased to three years for long term capital gains and made effective from 10th July 2014. Any shares sold after this date has to meet this criteria. Since you have sold it prior to this date the previous definition of one year applies if purchased one year or before.
2. Coming to investing in an under construction flat the entire construction period is considered and the construction should get completed within the stipulated period after the transfer date. Here I am not well aware of whether you can claim exemption as the date of allotment is well before “Within one year prior” condition. You will have to take assistance of a tax expert to get a clear picture.
3. Lastly you have borrowed for the construction. Did you repaid the loan? If yes you are allowed. If not it will be debatable especially under Section 54F and a tax expert can clarify you.
So two aspects which I am not very clear is Date Of allotment since its exceeding one year prior condition and borrowed money. For this you will have to seek guidance from a tax expert.
Dear Mr. Jitendra,
You have correctly understood my query, whereas Mr. Joshi has not been able to understand the problem.
To reiterate the facts, I have sold my unlisted equity shares held for more than a year in May 2014 (well before the new amendment applicable from 10th July 2014).
This long term capital gain is available for exemption u/s 54F (unlike sec54, this section provides for transfer of any capital asset other than residential house), if the sale proceeds are invested in a residential house.
Now, I had already purchased a flat under construction in Jan 13 & got it registered in Feb13. The possession was given in June 2014 only. I had also taken loan from Bank to pay for my purchase of the property purchased. The payment was done in stages and the last payment was done in July 2014.
Considering the above facts, your response point wise is as follows:
1. As rightly mentioned by you, this is a case of long term capital gain taxable at 20.6% in A.Y. 15-16 since transfer took place in May 2014. There is no question of filing ITR as Mr. Joshi was alluding.
2. You are not sure whether the flat purchased under construction before 1 year (allotment before 1 year) can be claimed as an exemption though the possession of the flat was given in June 2014. I have the same query & is unfortunately not resolved.
3. As mentioned earlier it was paid in stages. Do you mean to say that part of the proceeds which was used to repay the loan is available for exemption and that part of the loan which is not paid from the sale proceeds is not available.
Regards,
Mamta
Hey,
I had two queries:
1. If a person is a PIO holder and it has got cancelled, can he transfer his property in India? i think yes as per the RBI circular on transfer of immoveable property in india.
2. Can the same person after such transfer avail exemptions for capital gains??
THANKS
Khushbu,
Within my knowledge-
1. A PIO can sell property in India but only to Resident Indian. A PIO cannot sell property to a NRI or a PIO. What is the status of the individual right now?
2. Yes it is allowed by investing in another residential property.
Still take guidance from a tax expert as i have given inputs based on my understanding.
Mamta,
If you have bought a property on loan and repay it from the sale proceeds then you can claim capital gains exemption provided it meet the specific conditions.Now in your case the only clarification needs to be taken is whether the date of booking the flat is under the stipulated conditions. If it does then even repaying the loan from sale proceeds for existing property is eligible for exemption.If it does not then question of exemption do not arise.
So consult a tax expert to get this clarity.
Hello Mr. Jitendra,
An NRI holding any immovable property in India will be assessed as an Indian citizen in respect of the said sale. All sec 54 stipulations as applicable.
Further transfer & sale have two different connotations under the relevant Acts.
Regards,
Hi
Greetings. I am a resident Indian and sold my residential property where I resides during the financial year 2013-14 for Rs.1.05 cr. I bought this property during the financial year 1994-95 for Rs.16 lakhs including bank interest on loan, home improvements etc. I would like to know what could be LTCG. I invested in other property whose possession is expected to be 2016-17 and paid to the builder as per construction linked plan. Please let me know whether I am correct or not.
Dear Mr Solanki,
We highly appreciate yours and Mr Vinay’s clarification to all queries raised by common people like me.I booked a flat in Jharkhand in July 2008,did the allotment agreement with builder and paid all the money except for registration of property.
In May 2014,registration of property was done and possession given at same time.Payment made in July 2008 – 28 lakhs.Sale price now – about 50 lakhs.If i apply inflation index,my cost of property will also be around 50 lakhs.Hence, can you advise if i am correct to apply inflation index from date of allotment and if yes,it means that i am not liable for gains tax.Also,does this money need to be deposited in Capital Gain Tax account and not in normal savings account.
Thanks
I have sold a residentialFlat in May 2014.
From the capital gain of this sale ,can I purchase a commercial property and claim LTCG benifit.
Also Can I purchase land and avail LTCG.
Dhanesh,
LTCG tax benefit cannot be claimed on commercial property or land investment. The exemption is available only on a residential property within the specified conditions.
Suman,
There is a difference for deriving capital gains in an under construction property. As far as i know once you have received the possession of the property the long term capital gains are calculated from the date of possession. This means after possession you need yo hold the property for three years to get long term capital gains. Contrary to this if you sell the property while under construction the long term capital gains will be derived from the date of agreement. The difference arises since during under construction you hold the right to purchase and not the flat parse because there is no constructed flat. Once you are in possession this right gets converted into ownership of a flat.
However, these are my views and so do confirm this from a tax expert.
Ramanuja,
For deriving capital gains the cost you have incurred over improvement will be added to the cost of purchase. However, adding the bank loan interest has run with debates previously due to double benefit i.e. Sec 24 and Sec 54 being claimed. Although few court rulings have allowed this exemption but looks like its still a debatable issue. So you will have to clarify this part of your query from a tax expert.
Rest investing in an under construction property is well suited for capital gains exemption provided the construction gets completed within three years from date of transfer of property you have sold. So verify this aspect from the two dates to know whether your investment is within the rules.
I seek clarification on Sec 54F. Had Invested full consideration in a New Property (Flat) in 2010, sale deed and agreement to sale were done in 2011, Allotment letter was recd in April 2012 and Possession letter on July 2012.
I intend to sale that property and re-invest in another flat. Which date will be considered for calculating 3 years tenure. Appreciate your response.
Ash,
Within my understanding in an under construction property once you receive the possession the capital gains is calculated from that date. This means after possession you need to hold it for next three years to treat capital gains as long term.
Clarify this aspect from a tax expert.
Fine for Capital gains on New Asset acquired it could be Possession date but what would be the impact on 54F exemption, which date should be considered as cut off for computing 3 years tenure before which one should not sell.
Hello Mr. Jitendra,
Ms. Suman had the query & again same from Ash.
[i’m putting the same reply to both.]
You’ve rightly answered the provisions & stipulations under 54/54F.
There are no clear provisions & if one has to claim tax benefits one has to take it up accordingly.
u/s 49, Indian Registration Act,1908 states that if the required documents are not duly registered the documents will not have any bearing on the property and that they do not confer any transaction rights over the property. In other words, the law does not recognize unregistered owners and does not give them any rights over the property.
So if a property is registered, it means that the person in whose favour the property is registered is the lawful owner of the premises and is fully responsible for it in all respects.
Mr. Jitendra an assessee’s aspect should be if capital asset u/s 2[14] of ITax & right to obtain conveyance. When the right was vested in the purchase? If right to own a property is capital asset as determined by registered documents the date of registration prevails as the date of acquiring the property as read with the provisions of sec 54 / 54F.
Regards,
Hello Mr. Jitendra,
Pl read my reply as above in context of Ms. Suman. I’m not posting it again.
Why this twist as per above query? Said “HAD I”, & now ask 54F clarifications. Irrespective under 54F also a new asset is created.
Regards,
Ash,
This year CBDT has clarified that that to qualify as an investment for construction Under Sec 54 F for reinvestment for capital gains the date of allotment is crucial. Payment of installments is merely a follow-up action and taking possession of a flat a formality.
In my view with this clarification date of allotment will be taken for three years rule and not possession. Still take view of a tax expert as I am resting my view within my understanding of this clarification.
Dear Sir
I still have doubts about my earlier query. Somewhere here only I read that you can not deposit the sale amount in your saving bank. It has be deposited in CGSA. In my case I will be selling my old flat ( more than 3 year old) to pay off my loan for a new flat that I just purchased. Now new buyer will make payment in my name. Cant I pay my loan from my account and still claim CG tax exemption. What process need to be followed in this case. Please advise in details. My loan is Rs 50L. My sale consideration will be Rs 70 L with CG of 30L.( Based on indexation) Thanks a lot.
Roopa,
Repaying your housing loan on the new flat purchased within the specified conditions is very well allowed for exemption. Coming to CGAS, studying further I came to know that there is a small lacunae wherein Income tax only specify that the LTCG amount should get deposited in the account before the ITR filing date which means even if it is deposited one day before you can claim the exemption.What you should do within the period of selling date and ITR filing date is not specified.
Having said that I am not very clear on how you can utilize the amount during this period. On depositing in savings account and repaying the loan, in my view you should be able to claim it as per CGAS specifications. But that’s my understanding and it will be wiser for you to get advise from a tax expert as income tax are delicate matters and you have to be very clear while you are making such decisions.
Thanks a lot Mr Solanki. I will try to confirm this from CA also. Many Thanks again.
Hi. Just wanted to know if section 54 exemptions would be applicable to those real estate investors/ traders who buy sell properties after holding them for three years purely with profit maximisation motive.tks. regular reader of your blog
I have a question and requesting for giving solution.
I had sold a flat in June 2013 in Rs. 42 lacs which was purchased in 1999 in Rs. 6 lacs.
I have purchased a plot measuring 250 square yards (2250 square feet) for residential purpose in Rs. 34 lacs in June 2014 and I am planning to start construction which will be completed by the end of 2015.
I want to know whether there is a “MINIMUM limit for construction area” to get the status of Residential property in reference of Capital Gains Tax exemption?
If I construct 150 square feet area building and boundary wall on that land, will it be deemed as a “residential property” for capital gain exemption purpose under section 54?
Hello Mr. Jitendra,
Advise Ms. Sunita that sec 54 does not distinguish, the 54 stipulations met with LTCG can be claimed.
Regards,
Hello Mr. Jitendra,
Mr. Amar has not put in full details.
The sale of flat in FY 13-14, [AY 14-15].
Assuming as per the indexation & as required within six months the LTCG has to be deposited in CGAC or invested in specified bonds.
The purchase of plot was in FY 14-15 [AY 15-16] what was declared for the FY?
Irrespective the LTCG investment is to the amount as stipulated & not based on built up area for exemption.
Regards,
Dear Mr Solanki, Do you also advise on TDS on property sale. We have bought this house in joint name taking loan in joint names. However all the payments are done by my husband. Even loan will be paid from his salary. Can we submit one 26QB form or we have fill 2 forms.?
Hello Mr. Jitendra,
Kindly advise Ms. Roopa, related TDS advice. Yes as per 194IA only the buyers 26QB to be submitted. [as in your case – your husband.]
In case of joint owners, the threshold limit is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all.
Regards,
Kindly read as 1941A. rgds
section 194IA not 1941A. rgds,
[typo in original was thought & repeated it earliermsg.]
Dear Sir , I have a Querry regarding Capital Gain Taxation .
My Father constructed a house 08 years back and paying propoerty tax from 2007 , now he has sold the house and shifted with me to mumbai due to old age . no bills are available for construction of house .
1- is there any formuls for calcullating valuse of house constructed .
2- what will be the tax liability , please expalin in details .
Thanks in advance for the reply .
Best regards . Jitendra
Dear Mr Vinay and Mr Jitendra
Thanks. As I understand that if they are two buyers ( as in my case, its me and my husband), do we need to fillup two 26QB forms. One on my PAN card and another on my husband’s. ?
Hello Jitendra,
At times i do not get instantly my post msgs & as it is it can be intransigent network probs. Hence repeated typos.
Jitendra, Ms. Roopa be advised that her husband has to deposit the money under 26QB challan, & ISSUE 16B accordingly.
An aspect is that she has not checked my reply to her of Oct, 28, 2014. [further wondering her CA unable to tell or want second opinion.]
The said post as under..
Regards,
Vinay Joshi says:
October 28, 2014 at 2:33 AM
Hello Jitendra,
Belated Deepavali & New Year wishes.
Ms. Roopa can be advised as under;
The new amendment rules specifically state that the amount of tax deducted at source consequent to payment on transfer of certain immovable property in terms of section 194 IA of the Income-tax Act, 1961 shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made.
It further provides that the payment shall be accompanied by a challan-cum statement in Form No. 26QB.
The certificate in form 16B shall be issued by the [purchaser] deductor to the seller. In the event the seller has no PAN, deduction will be 20%. Buyer need not have TAN.
Both parties should essentially have PAN.
Regards,
Hello Jitendra Solanki,
Mr. Jitendra can be advised to undertake valuation from a competent valuer [recognized], determine the value as per the set norms & derive at the fair market value as on sale date/year.
Thereafter he has the benefit of indexation to ascertain the LTCG.
If the said LTCG invested as per the norms there will not be any tax liability. Alternatively 20.6%.
Again as i’ve just answered Ms.Roopa, 194IA prevails, 30L/50L accordingly. [Mr.Jitendra pl go thro’ it.]
Regards,
Sir I had seen your reply, but question still unanswered. My question is in case of 2 buyers ( Joint buyer as sale deed says 50:50 share of each) and one seller, Do we need to submit two 26QB form , one from my side and one from my husband. As per NSDL website we need to fillup two forms. My question is though we, myself and my husband are joint buyers, but total consideration has been paid by my husband. So I need a second opinion if only my husband need to fill up 26QB or we both have to do it..
Sir I had seen your reply, but question still unanswered. My question is in case of 2 buyers ( Joint buyer as sale deed says 50:50 share of each) and one seller, Do we need to submit two 26QB form , one from my side and one from my husband. As per NSDL website we need to fillup two forms. My question is though we, myself and my husband are joint buyers, but total consideration has been paid by my husband. So I need a second opinion if only my husband need to fill up 26QB or we both have to do it..Thanks a lot for your help on this
I am selling my flat at 40Lkh after staying there for 5years and purchasing flat in Delhi costing 90lkh. I have a capital gain of around 30lkh. The flat I am purchasing has two registries one 1Rk and another 1BHK but in actual it is one flat. The flat I am selling is in my name. But the new property I am purchasing will be in joint name of me and my husband. Will I get rebate under section 54. Since currently we have not done registry of new flat which has two registry can you suggest so that we can get rebate under section 54. Currently the amount we are putting are 40lkh and 50lkh for two registries of same flat. If you suggest we can change the split amount of two flat so that we can get rebate under section 54.
Amar,
As answered by Vinay the Capital Gains is not based on the area of the house but the total cost.So there is no such minimum limit to construction area to get status of residential property.
Dear Sir,
I have sold my flat at 30 Lkh after 4 months from the registration date and purchasing flat costing 51lkh. I have a capital gain of around 15lkh. The new property I am purchasing will be in joint name of me and my father where the previous one registered on my name only.
The date on which I sold my flat is 2-Dec-2014 and the date on which I will register the new flat would be on / before 31-March-2015.
So, can you please advice if I will need to pay any tax due to the profit from my old flat ?
Thanks ,
Sumanta
Dear Sir
I have 2 queries
a) I sold my property which was solely in my name. I plan to purchase NHAI Bonds from the profit taxable portion , with having my wife as a joint applicant for the bonds. Is it ok ? Will I be allowed the tax benefit under section 54 E?
B) My above property was in the joint name of my mother and myself for > 10 years with my Mother being the 1st applicant. She recently gifted me her shares and I became the sole owner of the property. I sold of the property within 3 months of the gifting. Will it be a Long term Capital Gain or Short Term ?
Thanks
Dinesh Sippy
Sumanta,
For long term capital gains the time horizon of holding the residential property for three years is important. If its an under construction property then rule changes once you have received the possession. So you need to make sure on this issue to claim for LTCG exemption.
Buying a new residential house after 3-4 months is fine. The important provision to be fulfilled is that the money is utilized before your ITR filing date. So you will get exemption.
But do check on the 3 years eligibility.
Hello Mr. Jitendra,
At times sketchy queries can’t be ascertained as to the taxation.
If Ms. Sumanta, inherited the flat held & sold after regn. as per 54 LTCG exemption can be availed.
The purchase of new flat in joint names is not an aspect.
Regards,
Hello Mr. Jitendra,
Mr. Dinesh can be advised as to LTCG exemption can be availed.
NHAI bonds max 50L & that gift is not sale.
Regards,
Dear Sir,
I have one query.
We have sold our rights on a ancestral house (we were not the owners but the house was under our possession for more than 50 years). The agreement also states that we are letting off our rights in the said house. So please let me know whether we can invest in 54ec bonds in order to save capital gains tax?
Regards,
Chetan
Hello Mr. Jitendra,
Mr. Chetan can be advised that they can invest in 54EC availing LTCG as per the norms.
Any sum or any consideration, as a condition of the relinquishment, transfer or assignment of tenancy or any premises eligible.
Regards,
Please find my query as below:
My father owns a flat in Mumbai which he is planning to sell.
As per to tax laws if he re-invests this amount in property within 3 years of selling it,
he doesn’t have to pay the capital gain tax.
For a smooth transition we have to buy a flat first in Hyderabad, such that he has time to shift at peace and then sell the flat in Mumbai.
To buy the flat, I am applying for loan. The new flat will be jointly be registered between me and my father.
If we jointly take the loan and he prepays a certain amount of the loan after selling the flat will he be eligible for capital tax gain exemption.
Regards,
Valmick
Dear Sir
I just wanted to know that i sale residential house property and purchase shop cum flat can i claim exemption on it.
Neha,
No you cannot claim exemption by investing capital gains in a commercial property. You can only do it in a residential property.
Dear Sir,
I purchased a under construction flat in October 2010 and registration done in same month and I got possession in December 2012 without possession letter from builder. Now i want to sale this property and asked for possession letter from builder now he ( builder) says since amenities works are not completed hence he will not get completion letter from local authorities hence he is unable to issue possession letter to me. In view of this I would like to know from you that whether i am eligible for LTCG benefits if i sale this flat? can i file my annual return under section 54 for gained benefits after sale of flat? From this gained benefits i want to purchase another under construction flat within 1 year or same fy year.
Mr Jitendra
I need some clarification on long term capital gain.
1. My father had invested in a land in 2002 and now have resold in 2014. The gain after sail is definitely considered in LTCG as I understand
2. Now to avoid taxes under lTCG, he plans to invest it in a new residential flat.
3. He intends to purchase this new flat with my younger borther, who has NRE status. Thus we intend the gain from land sale of my father will be totally invested in this new flat, and balance amount for the flat will be funded by my brother through NRE loan
Please suggest –
1. If this model helps my father in avoiding LTCG?
2. While registering the flat, does the flat should have prime name of my Father and secondary name as of my brother?
3. What else important clauses we should have in the flat registration document so father’s capital gain exemption is assured?
Abu,
House being bought jointly with legal heirs are very well exempted under long term capital gains provision. So if your father is buying the house with his son jointly he can still claim the exemption.
However, I am not very clear on how the provision is applied if the son has NRE status. You will have to seek guidance of a tax expert on this matter.
Hello Sir
1) I have 2 residential properties (Property A in my solely my name and Property B held jointly with my sister) and am planning to sell property A and invest the proceeds in a different residential property to save on capital gains tax. I am planning to gift the newly invested residential flat to my sister through gift deed within 6 months from the date of purchase. I wish to know if there is any time limit before I can gift this newly purchased property to my sister? Will there be any capital gain implications?
2) Alternatively I wish to ask can I sell of my property A and invest in a new property with me and my sister as joint owners? Will it be interfering with any long term capital gains guidelines of section 54? Has the new property to be purchased in my name or joint name is allowed?
Also note that we both are NRIs since the past 8 years+
In the above scenario, if I am allowed to invest with my sister as joint owner and still be eligible under section 54, what is the time limit that I can transfer my share in the new property to my sister through gift deed?
Hello Mr. Solanki,
To begin with let me thank you for providing this free service that is an immense help for so many people who are transacting real estate. Now, coming to my question:
If I sell a property for 1 Cr, I would be receiving 99L after deduction of TDS by the buyer. Considering there are no other expenses involved, my net sale consideration for the purpose of LTCG calculation will be 1 Cr or 99L?
Thanks and Regards,
Anirban Dasgupta
Anirban,
Your net sale consideration is R 1 crore. When you file your returns you will derive the capital gains taxation which will get adjust with TDS which has been deducted. If liable you will pay the remaining tax or if more has been deducted then you will get the refund.
Dear Mr. Salanki
You are running wonderful blog.
I have couple of questions regarding sales proceeds of joint (50:50) residence inherited house property.
a) cost of acquisition will be also 50:50 or both can claim entire cost of acquisition ?
b)If property is built before 01/04/1981 then how to find out FMV of our inherited property ?
c) can I use my inward share in paying my existing purchased (purchased before 4 years) housing loan and avoid CG ?
d) If I require to buy new house to get exemption then can I buy at my wife’s name or joint name (me and my wife)
e) if I will get money in Apr 2015 then where can I park my money till I purchase new house and till what period ?
Thanks & Regards,
Hitesh Shah,
Thanks for the appreciation.
1. In a joint residence the tax liability is shared equally. Whether tax liability is derived individually or tax liability is shared post capital gains tax calculation is what I am not completely aware of. May be a CA will guide you more appropriately.
2. FMV of property built before 01/04/1981 is taken as on this date.
3. Capital gains can only be saved if you invest the proceeds in another property within two years or within one year prior to the selling date.The loan can be adjusted only if it is availed within this time horizon.
4. You wont have any issue if you buy new property jointly with your legal heirs. Buying in your spouse name also save tax if you can prove that funds are deployed by you and property was purchased not for only higher tax benefits. However, I will advise you to buy it jointly.
5. The rule is that any money which remains unutilised should be deposited in capital gains account scheme before your return filing date. So you will have to check when you need to show it in your ITR since you are receiving money in April 2015..
There are many rules which need to be understood in detail and so i will advise you to seek assistance from a good tax expert.
Below are the transaction details :
1. Purchased one vacant site in the year 2000-2001 for Rs. 184000 (one lakh eighty four thousand)
2. Sold the above in the year 2013-2014 ( 24-08-2013 ) for 1920000 ( Nineteen Lakshs Twenty Thousand )
3. Purchase another site on 14-02-2014 for Rs. 3839400 (thirty eight lakhs thirty nine thousand four hundred ) 50 % share
4. Given the above purchased site for joint venture on 20-03-2014 to develop residential flats for which am eligible to get 4 flats .
I do not own any house or residential flat .
Please let me know if i can gain capital gain exemption for the above transaction
Dear Mr. Solanki,
Kindly assist me with a problem. I inherited old ancestral agricultural land in yr 1992 and sold it for Rs 3.15 lac in February 2015. What will be my tax liability and how can i save tax on long terms capital gains?
Please clarify
Regards
Dear Sir
I purchased a flat in Nov 2014 taking a loan from the bank. I am now selling another flat which I bought in 2002 and want to pay off my loan that I took for the flat in Nov 2014. Do I need to open CG account to get the proceeds from sale or Can I get it in my personal account and then pay the loan amount to the bank. The buyer will give cheque in my name only. Please clarify. Thanks a lot
Roopa,
You can get the proceeds from sale in your bank account and pay off the loan. However do remember that sale of a plot comes under Sec 54F and so you have to invest the entire sale proceeds. In case you invest only partly then you will be able to claim benefit proportionately.
Still take view from a tax expert before taking decisions on this aspect.
Roopa,
Correction. Since yours is a flat you have to invest only the gains and not entire sales proceeds.
Thanks a lot Mr Solanki.. I have a capital gain of around 55 L. my portion of loan amount is 60 L. hope this is fine.
Thanks a lot Mr Solanki.. I have a capital gain of around 55 L. my portion of loan amount is 60 L. Entire proceed is 90L. Total loan is 1.20 ( 60 mine 60 my husband). Can I pay entire 90 L as loan
Shekhar,
If the first purchase was a plot then the capital gains exemption fall under sec 54F. This section has a rule that you can own only one residential property apart from the one you would have bought to claim exemption.
I am not sure how your 4 residential flat will be treated. Also, new rule has become applicable wherein you can claim exemption on capital gains by investing only in one residential house.
In my view you should consult a good tax expert as there may be tax legalities involved in your case.
My father purchased a plot in 1957 in and constructed a house on it in . By way of family settlement in court , its ownership rights was given to me in 1975 . I got additions / alteration on it from my funds and got it mutated in municipal records for house tax purposes since 1975 and major portion of this house is self occupied and of remaining I have let it out and also showing residential rental income on it since 1982 in my I.Tax returns . Some portion of it is also rent out for commercial purpose ( godown ) since 2008 . my father expired in 2005 . I also got relinquishment deed registered in my favour from legal heirs of my father in 2014 . I have another aparment in my name which I have purchased three years back by investing the sale proceeds of a shop taking benefit u/s 54 F and to be sure as I have availed the benefit of sec. 54F by purchasing the already mentioned apartment in my name ( second house ) , 3 ( three ) years back , I am told that once you have taken a benefit u/s 54F , by purchasing a house one cannot take the benefit of sec. 54 . please advise.. Now if I sell this ancestral house , and I purchase another house from the proceeds of this sale , can I am eligible for capital gain tax exemptions or not u/s sec. 54 , please advise .
sir, my mother-in-law sold a residential property in delhi on power of attorny. with that money along with loan in my husband name we purchase a flat in the name of my husband and father-in-law. Is my mother-in-law come under tax liability
Dear Sir,
I have one small doubt. We have sold off our rights on a ancestral house to a developer and received some amount. We were neither a tenant or a owner. It was something in between and we never paid any rent nor any house tax. But we had the possession of the house for more than 70 years. Can the amount received now be put in Capital Gains Tax saving bond
Dear Sir,
I have one small doubt. We have sold off our rights on a ancestral house to a developer and received some amount. We were neither a tenant or a owner. It was something in between and we never paid any rent nor any house tax. But we had the possession of the house for more than 70 years. Can the amount received now be put in Capital Gains Tax saving bond?
Thanks for the reply,
I think i will get capital gain exemption for the financial year 2013-2014 as all the transactions …….. sale of old plot, purchase of new plot and agreement for joint venture has happened in the same year.
Will i get capital gains during possession of flat or sale of flat.
Vandana,
The tax liability of capital gains from property will be on the owner of the property. Since your mother held this property on POA she will be liable for capital gains tax. This is my view.
You should seek advice from a good tax expert to get a clear status.
Dear Sir,
If a house property is sold which was earlier held by Joint Owners (i.e husband & wife). Whether in that case also the exemption u/s 54 is available or not..???
Paras,
If a property is owned jointly then both the owners are liable for payment of their share of capital gains tax. Since the tax liability is there they can very well claim exemption under sec 54.
Shekar,
I will not be able to comment on this aspect. You will have to seek guidance of a tax expert.
Dear Sir,
Is it necessary to buy property in the name of both or even one person can claim exemption u/s 54 for the whole amount?
Dear Sir,
Awaiting your reply about my following query.
I have one small doubt. We have sold off our rights on a ancestral house to a developer and received some amount. We were neither a tenant or a owner. It was something in between and we never paid any rent nor any house tax. But we had the possession of the house for more than 70 years. Can the amount received now be put in Capital Gains Tax saving bond?
My father purchased a plot in 1957 in and constructed a house on it in . By way of family settlement in court , its ownership rights was given to me in 1975 . I got additions / alteration on it from my funds and got it mutated in municipal records for house tax purposes since 1975 and major portion of this house is self occupied and of remaining I have let it out and also showing residential rental income on it since 1982 in my I.Tax returns . Some portion of it is also rent out for commercial purpose ( godown ) since 2008 . my father expired in 2005 . I also got relinquishment deed registered in my favour from legal heirs of my father in 2014 . I have another aparment in my name which I have purchased three years back by investing the sale proceeds of a shop taking benefit u/s 54 F and to be sure as I have availed the benefit of sec. 54F by purchasing the already mentioned apartment in my name ( second house ) , 3 ( three ) years back , I am told that once you have taken a benefit u/s 54F , by purchasing a house one cannot take the benefit of sec. 54 . please advise.. Now if I sell this ancestral house , and I purchase another house from the proceeds of this sale , can I am eligible for capital gain tax exemptions or not u/s sec. 54 , please advise .
Sir awaiting your reply about my following query ;
My father purchased a plot in 1957 in and constructed a house on it in . By way of family settlement in court , its ownership rights was given to me in 1975 . I got additions / alteration on it from my funds and got it mutated in municipal records for house tax purposes since 1975 and major portion of this house is self occupied and of remaining I have let it out and also showing residential rental income on it since 1982 in my I.Tax returns . Some portion of it is also rent out for commercial purpose ( godown ) since 2008 . my father expired in 2005 . I also got relinquishment deed registered in my favour from legal heirs of my father in 2014 . I have another aparment in my name which I have purchased three years back by investing the sale proceeds of a shop taking benefit u/s 54 F and to be sure as I have availed the benefit of sec. 54F by purchasing the already mentioned apartment in my name ( second house ) , 3 ( three ) years back , I am told that once you have taken a benefit u/s 54F , by purchasing a house one cannot take the benefit of sec. 54 . please advise.. Now if I sell this ancestral house , and I purchase another house from the proceeds of this sale , can I am eligible for capital gain tax exemptions or not u/s sec. 54 , please advise .
Paras,
The exemption can be claimed only by the owner of the property. So if both have joint ownership then they can claim exemption for their share of the property.
Chetan,
If It’s an ancestral house then you are the legal owner of the property since you are the legal heirs of the previous owner. You will be liable for capital gains tax and so for exemption you can invest the gains in capital gains bonds.
Hello Mr. Solanki
I have Property A in my solely my name and am planning to sell property A and invest the proceeds in a different residential property to save on capital gains tax. I wish to ask can I sell of my property A and invest in a new property with me and my sister as joint owners? Will it be interfering with any long term capital gains guidelines of section 54? Has the new property to be purchased in my name or joint name is allowed?
Thank You.
sir,
My mother was purchased a house for Rs. 3,000/- in 1964, the same was gifted to me in 6.03.2003 (market value i.e registration value is Rs.8,61,260/-) , the same property I was sold for Rs. 55,00,000/- on 09-02-2015 and purchased a residential house for Rs.14,80,000/- and purchase another second house Rs. 23,70,000/- on the name of My wife and purchase another third house for Rs. 24,50,000/- on the name of my son. Now the question is how much amount I have to paid as a capital gains. please tell me . my email address is ksraok@rocketmail.com
Mr. Srinivas,
As per sec 54 you have to invest in one house, the entire LTCG.
Its assumed the LTCG, your individual 100% share in the gifted property.
As per cost inflation index, LTCG invested in your name is exempt.
Rest will be taxable @20.36%.
Regards,
M.L.Verma,
Your tax liability will be calculated by taking the purchase date of previous owner i.e. from whom you inherited it. If that is before 1st April 1981 then fair market value as of this date will be taken in consideration. The indexation benefit will be applied to this cost and your gains will be calculated. You can read below to know the calculation :
http://www.jitendrapssolanki.com/2014/08/understanding-long-term-and-short-term-capital-gains.html
You can seek a tax expert advice for exact calculation of your gains.
Dear Sir,
As i have already mentioned that though we were staying in the house for more than 70 years but we were neither the owners nor did we pay any rent to anyone. The papers are not in our name.
Can this still be treated as capital gains and the amount so received can be put in 54 EC bonds?
Solanki Sir
I have sold my residential house & purchased a new residential house.
But still some amount is balance with me, which i would spend later on.
So, I am to deposit the sum in capital gain account scheme.
My query is what’s the last date for opening such account. In normal cases its due date u/s 139, but as new residential house is already purchased, will this make a difference?
Liladhar,
Any capital gains which remain unutilized should be deposited in this account before your Income Tax Return Filing date i.e. 31st July. Both residential house purchase and your capital gains account will be shown in your ITR to claim the exemption.
Dear Solanki Sir,
I have one query regarding Capital gain adjustment. I have one residential land which I bought on 14th Feb 2013. I want to sell that land sometime in Feb 2016 when it will complete 36 months so that I can use capital gain in another residential property.
Now, I have already bought on residential apartment in Gurgaon and signed “Agreement to Sell” with seller on 31st Jan 2015 where transfer completion date/deadline was mentioned as 13th Mar 2015 i.e. by 13th Mar, I was suppose to pay all payment and seller was suppose to transfer apartment to my name. Actual property transfer took place in builder’s record on 12th Mar 2015. I am still waiting for possession. Now if I sell my residential land, say on 15th Feb 2016, can I adjust capital gain in my Gurgaon deal? I am not sure which date will be considered as purchase date for Gurgaon apartment as we can only use capital gain in properties bought one year before or 2 year after capital gain. My Gurgaon property deal dates are as per below –
1) 31st Jan 2015 – ATS sign date
2) 13th Mar 2015 – Actual transfer date
3) possesion date which is still awaited
4) Registry date which is still awaited
Appreciate any help on this.
Regards,
Alok
Mr. Solanki,
You can advise Mr.Alok, that an exemption from LTCG tax can be availed by reinvesting the LTCG in only one new residential property, situated in India, as per sec54F, within specified time frame.
54/54F states, within one year prior to sale date or two years from the sale date for or within three years for an under construction property, subject to other conditions as specified.f the LTCG not invested partly/wholly as per stipulations before the due date of tax filling returns, [as the case may be], the underutilized LTCG to be deposited in CGAS or bonds
Regards,
Mr. Solanki,
You have to advise Mr. Srinivas, that he should go for fair market value evaluation as on April 1981. [the state registry] has no aspects for CII unless individually accepted.
In the given situation, the assesse claims on the max LTCG invest in one house, LTCG tax on underutilized amount prior to filling returns can be 20.36%, unless the said amount [difference in LTCG] is deposited as stipulated in sec54.
An exemption from LTCG tax can be availed by reinvesting the LTCG in only one new residential property, situated in India, as per sec54, within specified time frame.
Regards,
Mr. Solanki,
Ms. Nimisha may be advised that there is no restriction sec 54 whatsoever, joint property purchase. Yes it has to be in the name of the assessee claiming LTCG exemption.
Regards,
Mr. Solanki,
JKcons to be advised that an exemption from LTCG tax can be availed by reinvesting the LTCG in only one new residential property, situated in India, as per sec54F, within specified time frame.
Regards,
Mr. Solanki,
The ownership of the property is to be ascertained, POA has no meaning.
Regards,
Mr. Solanki,
She be advised exemption under section 54 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 within one year and uses the amount to pay back the loan, such repayment should be taken as fulfilling the condition of using the sale proceeds. LTCG exempt to the invest.
Regards,
Mr. Solanki,
In the event of 54F discard if the assesse is sure of getting exemptions, unworthy discussing it in the forum.
The advisers have backed him or may be the developers.
No more an issue.
Mr. Solanki,
You can advise that no such provisions exist.
In fact with NRE?! it’s only an a/c NOT status the assessee has obligation of paying taxes, advantage is double taxation.
Howsoever, 54F, stipulation prevails.
Regards,
HELLO
I HAVE A QUERY ABOUT LONG TERM CAPITAL GAINS.
I SOLD MY LAND AND WHATEVER THE PROCEEDS ARE AVAILABLE THAT I WANT TO UTILIZE FOR REPAYMENT OF LOANS. IS IT POSSIBLE TO GET EXEMPTION ON LONG TERM CAPITAL GAINS.
THANK YOU
SHWETA R
Shweta,
There is a condition laid down for capital gains exemption by investing in a new property. It has to be bought either within two years after selling of existing property or within one year prior to selling of the property. If you bought this residential property beyond 1 year prior to selling existing one then you may not be able to claim exemption on housing loan repayment. Also there are few other conditions under Sec 54F which you should read.
For more clarity you can take assistance of a tax expert.
thanks for
thanks for your input , but I wanted to clarify that my question was related to section 54 not 54 f , , as I understand that by selling a residential house and purchasing another resdential house one can claim exemptions sec 54 irerespective of no. of houses one have , . the restriction of one house applies only u/s 54f . or one can avail only once the benifit of sec 54 or 54f ? please advise ….
jkcons,
Yes under sec 54 there is no restriction on the number of property you can hold. You can claim this benefit whenever you derive long term capital gains from a residential property.
Hi
We have sold our property in Delhi in 2010 & got property gain for 33 lacs. As we do not wanted to purchase a ready to move in property then, we planned to buy a builder property in noida in 2010 in construction Link Plan (CLP). For this as per tax regulation, We opened an account of Capital Gain in government bank and deposited the capital gain money after giving the booking amount and other applicable charges within the same year . As per the builder requirement, we payed the money to him as per the CLP plan in next 4 years. Now after 4 year of purchase, in 2015 , the builder is giving possession & registry of the property.
* Now i like to ask that as per Tax law, the property has been kept with us for more than 3 years in CLP. Kindly suggest if now we can sell the property or there is any further clause in Tax for capital gain.
* Do we again need to keep the property for next 3 years after date of possession/register. This means we need to keep this property for 8 year from the date of purchase to save capital gain.
*If we can sell the property, Do we need to again deposit the money in capital gain account or we can utilize it further to invest .
thanks once again for your inputs , but to be sure , I again request you that you go through my inquiry once again and reply as after this year 2015 -16 budget , there are conflicting views on sec 54 and 54f , if you clarify these points in your blog , it will help other readers also , thanks once again
Mr. Solanki,
You have already made it clear sec 54 to the esteem patron.
Jkons be advised that there are no conflicting views whatsoever on 54 neither 54F as per the IT provisions.
Mr. Solanki he should state in which manner there are conflict vis-a-vis the said sections. Rulings & judgments important.
Yes in the past courts have decreed that no LTCG invest in new property as stipulated, benefit can’t be denied.
[HOWSOEVER THIS FORUM ALWAYS ADVOCATES TO ABIDE BY PREVAILING SECs, AS CONCERNED & IN NO WAY TO EVADE OR AVOID COMPLIANCE.]
Further this forum is only for general guidelines on the issues & hold no responsibility, whatsoever to be deemed as advisory on specific, individual issue .
Any specific aspects may be taken up with details to ones tax counselor.
Regards,
Mr. Solanki,
Mr. Apoorva be advised, as per 54, property to be held in name for min 36 months, CLP does not arise, to avail LTCG on sale of the said property. [in fact by default CLP benefit can be got in present case .]
Further, yes after 36 months on sale as per prevailing stipulations the LTCG will be investible as stipulated.
Regards,
Dear Sir,
I have a residential property which was divided into 3 parts and sold to 3 different buyers with 2 sale deeds in Apr 15 on different dates and 1 sale deed in May 15. The long term capital gains from these 3 parts of residential property is 15 lac, 14 lac and 25 lac respectively (total 54 lac).
Can I park whole money in capital gain bonds to save long term tax?
Alternatively, Can I park 50 lac in capital gain bonds and invest remaining 4 lac in ready to move/under construction residential house to save tax?
Regards
Amit,
Yes the money can be invested in capital gains bonds to save long term capital gains tax or can be mix of bonds and property for the same.
Dear Sir,
I sold a residential flat in March-2015 and planning to buy another residential flat within 6 months. I have one more residential flat in my name (at the time of selling the flat) for which I had taken home loan and availing interest on home loan exemptions.
Is there any problem in getting capital gain tax exemptions in my case?
Regards,
Seshadri
Seshadri,
Since your capital gains comes under provisions of Sec 54 there is no restriction on holding number of properties. So you will get exemption on buying of new property.
Dear Sir, My brother just sold his 3 Non agricultural plots at a consideration value of Rs 78.78 lacs total in August 2014. The sale deeds are registered and he received full payment in his bank account. He had a long term capital gain of Rs 61 lacs from this sale however he transfered this 78.78 lacs amount to my father’s bank account from whom he has borrowed money for setting up his business. My father passed away in December 2014. Now my borther has no money in cash as well as in his bank account either to reinvest or put in CGAS.
My query is – Can he borrow a home loan of Rs 78 lacs and buy a new residential property worth atleast Rs 78.78 lacs? Is it allowed? If not, can he borrow loan from his friends and relatives and invest in a new residential property to avoid payment of Capital gain tax? Please guide.
Hello Mr.Jitendra,
Mr. Pankaj may be advised that none of the ‘possibilities’ can save him from paying capital gains tax. Today its May 2015, nine months.
FY2014-15 – [AY2015-16] IT returns can be filed on what basis?
At least as of March 31, the supposedly calculated LTCG amount of 61L should have been in the bank – documented.
Regards,
Hello Mr. Jitendra,
Its assumed that the flat sold in March 2015 was held for min 36 months or more. [not specified]
Further not only interest but 80C principle amt paid should be availed within overall limit as per sec.
Regards,
hello
my mother has 3 residential properties in her name.
she wants to sell one of them, which was bought in FY 1982-83 for Rs 50000 and she spent Rs 5 lakhs on constructing it in the FY 1992-92. Now she wants to sell this house and buy a bigger residential land in the outskirts of the city. the possession of this residential land shall be after 3 years. the total cost of selling the house and buying the new residential land is somewhat same, i.e Rs 1 crore.
can you please tell what will be the tax liabilities on my mother?
Thanks
Mahendra,
Under income tax provisions, there is no tax exemption on long term capital gains if you invest in land. You can only avail the exemption by investing the gains in residential house. So your mother will have a complete tax liability on the gains she has made on residential properties if the amount is invested in a land.
Hello,
I own a land and planning to purchase an apartment. As of now I have not sold the land and would not like to sell it till I finalize and purchase the flat. In case I purchase the appartment first and then sell the land in three to four months in the same year, can I claim under section 54F for that year.
Raghu,
Yes you will be able to claim under section 54F as you can purchase a residential property even within one year prior to selling date.
Dear Sir,
I want to sell the plot/land purchased 10 years back. Below are the details..
Purchase cost – 2004 – 20 lakh
Sale Cost 2015 – 90 lakh
Capital gain with indexation – 43 lakh
I have 3 flats (1 occupied, 1 with agreement – legal issues, 1 – booked in may’2015 with loan).
Questions :
1. Am i eligible to buy the new flat with the net 90 lakh to save full tax.
2. Can i take 50 lakh bond and remaining net consideration of 40 lakh pay for the flat booked in May’2015
3. If i decide not to buy any property here due to eligibility of having more than 1 house ownership. then whether 50 lakh bond should be considered from the net sale value of 90 lakh or net capital gain which is 43 lakh. if this is from the capital gain then there will not be any taxes after purchasing the bond.
4. If the 50 lakh bond is taken from net sale value then my total tax liability would be (90-50)*20% = 8 lakh. Pl confirm
5. If the 50 lakh bond is taken from net gain then my total tax liability would be (43-43)*20% = Nill.
6. I am also getting the Housing loan benefit on the occupied flat. Whether this will go if i buy any other flat with the net consideration of 90 lakh.
7. Can i sell the flat booked in may’2015 to become eligible to buy the flat with next consideration value of 90 lakh. In that case my holding of residential house becomes to (1 occupied, 1 with agreement – legal issues)
Thanks,
Manish..
Manish,
1. Capital gains from land falls under sec 54F where you can have only two residential properties including new one for claiming exemption. Since you already have more than that in my view you may not be able to claim exemption by buying another property. Get it confirmed form a tax expert.
2. Bond is not an issue you will get exemption. But on property even the 2015 one i am doubtful you will get exemption due to 2 property clause.
3. In my view you need to invest capital gains and not entire sale proceeds on the bonds. Still you will have to check this from a tax expert. Post investment the interest you earn from these investments will be taxable.
4. I am not a tax expert so for deriving the exact tax liability you should seek a tax expert advice.
6. Buying another flat does not impact your housing loan benefits.
7. As i said the clause is for maximum 2 residential property including the new one – “the assesse can hold only one property other than the new residential property on the date of transfer. Even after three years of purchase of the new property, no new property can be bought else the capital gains become taxable”.. I am not sure how the agreement one will be treated.
Hi Sir,
Have sold residential plot in December 2014. I incurred capital gains. May I request you to clarify the following issues:
1) I have only one apartment in my name. If i buy a second apartment, will I be eligible for tax benefit?
2) By when can I invest the capital gain amount in another house?
3) Can I buy the flat in a joint name with my son?
I will be grateful for your comments.
Regards,
Col Mehta
i have got the money from ansestor property i want to invest the money in underconstruction project what it the rule for income tax
Col Mehta,
1. Under sec 54F provisions you can have only one residential properties apart from the one you will buy for claiming exemption. This means you can hold 2 properties. So you will be able to claim exemption if you buy a new property.
2. You have three years to purchase it. But till the time funds are not utilized they need to be deposited in capital gains account scheme (CGAS) and shown in ITR to claim exemption.
3. Yes you can buy the flat jointly with your legal heirs.
Take a tax expert view before you make any decision.
Hello Mr. Jitendra,
Kindly ask Ms. Smita to elaborate on ‘money from ancestor’ property’ as stated by her. It’s important to determine whether it’s 54/54F invest.
As this particular forum deals with 54/54F taxation issues.
Regards,
Dear Mr. Solanki,
I can’t thank you enough for the invaluable service you are providing to people like me who do not have ready access to a knowledgeable CA. Coming now to my question:
A NRI friend will sell his apartment in India which is owned jointly by him, his wife, son and daughter (4 owners). None of them have filed taxes in India before.
1) Can he accept the full sale consideration and get TDS deducted only in his name (1st owner) and file for taxes for the full transaction? This will minimize the paperwork for buyer as well as seller.
2) Is there any tax advantage in receiving the consideration in four equal parts, also TDS deducted in 4 parts then filing 4 tax returns? What I have in mind is – has LTCG got any connection with income slabs (0-2.5L – 0%, 2.5 -5.0 lacs – 10%, etc.) ? Unless there is a significant advantage, he will definitely prefer to do all financial transactions under one name.
Dear Jitendra
I have eight residential properties and I stay in rented accommodation. Facts of my case are below:
1. Four are let out with possession of all in year FY 2011 2012 – all chargeable under the head – Income from House Property
2. One flat at my native place which is used by my family
3. Three flats are under construction :
a. First:
Booking Date: August 20, 2012
Allotment Letter Date: October 22, 2012
Debit of first cheque: October 22, 2012
Registration Date: December 7, 2013
Expected Possession Date: June 30, 2017
Percentage of total payment to builder: 78%
b. Second and Third:
Booking Date: May 15, 2012
Allotment Letter Date: June 18, 2012
Debit of first cheque: May 30, 2012
Expected Possession Date: November 30, 2017
Percentage of total payment to builder: 20%
I intend to sell total six properties – four completed properties and two under construction properties (under 3b above) and repay the loan taken for under construction property 3a. After this exercise, I will hold two properties – Flat at my native place and under construction property in 3a above
Queries:
1. Properties under 3b which gives right to own residential houses are more than 3 years old from allotment letter date. Agreement with builder not yet executed. Can I avail the benefit under section 54 or 54F.
2. Sale of multiple properties (six in this case) to invest in one residential house – wld it be allowed
3. Property under 3a. has been booked and registered more than 1 year back and possession is expected within 3 years from transfer of all the 6 flats. Will I be able to get exemption under Section 54
4. Since I am using the money to repay the loan for payment made before the date of transfer – would it result in any complication
5. What if builder fails to deliver the property under 3a within the three years requirement under section 54
6. I need to hold flat under 3a for 3 more years from date of completion of construction or from date of registration or any other date. Am just checking in case it is later, I will have the flexibility of selling 3a before taking the possession in June 2017
7. I have already once availed of Sec 54 benefit in FY 2010 2011 to purchase my native place flat. I am not selling the same. Will it have any impact on my Sec 54 eligibility for 3a.
Request your revert
Rgds
Amit
Dear Mr Solanki,
I have similar query however in my case I have as such one and half flats in my name. One flat with single ownership and anothe flat with half ownership. If I have sold a residential plot in October 2014 and have bought a new (third- different than the two mentioned) flat in August 2014, will I be able to adjust the long term capital gain towards the purchase of new flat?
I sold my residential property with 30L capital gains and bought a plot for 28L in a opinion that i will build a house and file the tax for the same but later with my son’s money i bought a house on my name for 28L . Can i claim that house for tax ? or should i need to build the house in that plot ?
Hello
Generally builders construct apartments and a typical taxpayer will only buy from builder.
My question is what is the meaning of ‘to construct’. Can I buy from a builder? Can I buy after project receives OC?
My reason for waiting for OC is I do not want to take risk. Because no matter how reputed the builder is there is always a risk. And then money gets stuck because in future prospective buyer will think document is not clear.
Or is it the case that ‘to construct’ means it is necessary to buy before OC i.e. traditional meaning of ‘under construction’
Since 54 is a beneficial position is it rigid that it has to be prior to OC?
Are there any such case laws?
Many Thanks in Advance
Hello sir,
My aunt got inherited urban agricultural property of 1acre thru Will, now in a possession to sell by partitioning among my aunt, her 2 children i.e., out of 22 sites into 3. This comes to sum of huge taxable income of 2.5 cr total. How to calculate capital gain tax and avail exemptions and rebates. reply ASAP.
thanks n regards
Anirben,
1. If there are multiple owners in an immovable property then the tax liability will be shared by them in the ratio of their ownership. One person cannot pay tax on behalf of another.
2. LTCG don’t have any connection with income slab. LTCG is taxed at flat 20% with indexation benefit.
In your friend situation he does not have any option but to file all the returns. Alternatively one can enter into family arrangement and gift/transfer the ownership to one person. But since its an immovable property all transaction will take place only through a registered document and so will involve a good amount of paperwork. In my view the property owners will have to file their returns separately.
You can consult a tax expert for more clarification.
Jammy,
Tricky situation. In my view it will be difficult to claim on this house since the source of money is from your son and not yours.
However, I am not a tax expert and so cannot go much deep into income tax provision. You will have to seek guidance from a good tax expert to get a clear picture.
Chirag,
The main condition for claiming exemption is that the property if under construction should gets completed within three years from date of selling. There is no such restriction that you cannot buy from a builder.
Thank you Jitendrabhai …
My other question was that to qualify for ‘under construction’ is it necessary that the allotment agreement or mou is done before OC ?
Sundar,
The taxability of the property will rest on the ownership i.e. at the time of selling who are the owners. If your aunt is the complete owner then she will be liable to pay the complete tax. If there are multiple owners then all the owners will bear tax liability for the gains they have made on their share.
You should consult a tax expert as this requires a good deal of calculation.
Hello Sir,
My query is that I had house which was situated in commercial area. The ground floor was commercial and upper was residential. It was transferred on my name in 1988. Recently I sold the property. The registration by new buyer is done as commercial property. It was one unit(in municipal records) but divided into two shops of one unit. So buyer bought the properties one on his name and other shop on his wifes name. So my query is
Which section is applicable here 54 or 54F (Because electricity and water supply was residential in one shop and registered as commercial by buyer)
So now I have two registries (buyer and his wife). I have no other house. I am living on rent. So my query is even if section 54f is applicable can I buy two properties from each consideration? The confusion here is that I can buy 1 property under this but then there is condition that you can not but another residential property for next three years under section 54f. So if I buy one property I satisfy all conditions but from second consideration If i buy another residential property, will my exemption be void as the section 54f says I can’t buy another property in next 3 years.
Last query is that can I take the benefit of sections 54f and 54ec simultaneously. As my net consideration suppose is 25 Lakhs and I buy a flat for 15 lakh and invest 10 lakh in bonds.
Thank!! Please Answer.
Dear Sir,
I have sold one land and earned LTCG of Rs. 36 lacs.I have also sold another land and earned LTCG of Rs. 24 lacs.I want to take benefit of Sec 54-F by investing in purchase of house.Can I take benefit of profit on sale of both lands and take exemption u/s 54-F or it will be restricted to LTCG of one land only?
Sir, Waiting for your expert advise please
we have purchase property in feb-2013 500000.00 to sale capital gain of 400000.00 now, in sept.2015 ( after 2 half year) i want to sell the same for RS.600000.00 what is my capital gain libiliety.
Sukh,
Firstly you need to determined in your situation whether the gains you have made is residential or commercial. If in the records it is sold as a commercial property then your gains are from a commercial unit. In that case Sec 54F will apply to it.
Second aspect is claiming exemption from it. In my view you will have to claim it by investing in a single property and by not buying two seperate properties. Under sec 54F you can own two properties at the maximum. But considering the provision in the budget for these sections it seems you can now buy only one property. Also since it is one unit in municipal records it will be difficult for you to claim exemption on it as seperate units.
These are my views based on information given by you. It is advisable that you seek a tax expert advise who will guid eyou more appropriately by looking at your records.
Hi
I want to use entire proceed from sale of a residential plot (bought in Dec 2010) to prepay a home loan. Loan is for a flat, under- construction and I booked it in Aug-2012. Expected to be delivered by Aug-2016. Can I avoid paying capital gain tax. I have another property in my name bought in 2008.
Rajesh Thakkar,
You can claim exemption on both the land by investing in house. But do remember that there is a condition attached under section 54F for the number of houses you can hold. Till you are meeting the condition you can claim the exemption.
Tanmay,
If you sell property before 3 years then the gains are treated as short term gains which get taxed at higher rates.
Tarun,
The condition for claiming exemption is that the property should get constructed within three years. Now you can prepay a home loan and claim exemption provided the condition of buying it within a stipulated period and property getting constructed with the stipulated time period is satisfied.
You can consult a tax expert to have more clarification.
Thanks for the response. Can you also tell if tax exemption on capital gain can be availed under section 54 if I have another property in my name bought in 2008. (And I am selling a residential plot for buying a new flat to be constructed within a year.)
Sir, Am looking forward for your response
Tarun,
Under sec 54 there is no restriction on number of houses you can hold. However, under sec 54 F(For selling a plot) there is a restriction of maximum 2 houses.
Pankaj,
In my view as per Sec 54F rule you can have ownership only in two houses. So buying a third house may actually disallow you.
Check with a tax expert.
Please let me know on this question.
I am owning 4 houses/flats in my name. I have received around 20 lacs in view of selling my hereditary property and I am planning to invest in one more flat. Am I eligible for Capital Gain if so under which section. please advise.
K Babu,
If the capital gains you have earned is from residential property then you can claim exemption under sec 54. Here you do not have restriction on number of house you own so you can invest in a new house. However, if the capital gains earned is from asset another than a residential house i.e. a plot or a commercial property then you can claim exemption under Sec 54F. But here you then have a limit on number of house you can own while claiming the exemption.
Hi Thanks for your reply on clarifying number of houses owned to avail Capital Gain. In continuation to the same, I seek one more clarification.
I have sold the property (which was inherited property through family partition) during last month. Using 100% of the funds, I wish to construct house a house in an empty plot which I purchased in my name during 1990. If I construct a house in the plot which i have already purchased in 1990 will I be eligible for capital gain. Request your guidance please
K Radhakrishnan,
Yes if you utilized the capital gains for constructing a house it will be available for exemption. The condition to be fulfilled is that the construction should gets completed within three years from date of selling the current property.
Dear Jitendra
Am re posting my query of August 8th, 2015 since it went unanswered. Request your attention and kind revert.
I have eight residential properties and I stay in rented accommodation. Facts of my case are below:
1. Four are let out with possession of all in year FY 2011 2012 – all chargeable under the head – Income from House Property
2. One flat at my native place which is used by my family
3. Three flats are under construction :
a. First:
Booking Date: August 20, 2012
Allotment Letter Date: October 22, 2012
Debit of first cheque: October 22, 2012
Registration Date: December 7, 2013
Expected Possession Date: June 30, 2017
Percentage of total payment to builder: 78%
b. Second and Third:
Booking Date: May 15, 2012
Allotment Letter Date: June 18, 2012
Debit of first cheque: May 30, 2012
Expected Possession Date: November 30, 2017
Percentage of total payment to builder: 20%
I intend to sell total six properties – four completed properties and two under construction properties (under 3b above) and repay the loan taken for under construction property 3a. After this exercise, I will hold two properties – Flat at my native place and under construction property in 3a above
Queries:
1. Properties under 3b which gives right to own residential houses are more than 3 years old from allotment letter date. Agreement with builder not yet executed. Can I avail the benefit under section 54 or 54F.
2. Sale of multiple properties (six in this case) to invest in one residential house – wld it be allowed
3. Property under 3a. has been booked and registered more than 1 year back and possession is expected within 3 years from transfer of all the 6 flats. Will I get exemption under Section 54
4. Since I am using the money to repay the loan for payment made before the date of transfer – would it result in any complication
5. What if builder fails to deliver the property under 3a within the three years requirement under section 54
6. I need to hold flat under 3a for 3 more years from date of completion of construction or from date of registration or any other date. Am just checking in case it is later, I will have the flexibility of selling 3a before taking the possession in June 2017
7. I have already once availed of Sec 54 benefit in FY 2010 2011 to purchase my native place flat. I am not selling the same. Will it have any impact on my Sec 54 eligibility for 3a.
Request your revert
Rgds
Amit
I have bought residential property “A” in 2006-2007 for 25 lacs. I bought another residential property “B” in 2012-2013. Now i want to sell property “A” in 2015-2016 for 180 lacs & buy another property with the capital gains which comes around to 130 lacs after indexation. So can i get exempt from capital gains tax if i buy another residential property against this amount? I am asking because i have property “B” as well.
Thanks in advance
Regards
Parag
I SOLD A HOUSE IN RS. 1,00,00,000/- ON 21/12/2014 AND PURCHASE IN 27/04/2000 IN RS. 7,00,000/-
AND
INVESTMENT IN NEW HOUSE RS. 40,00,000/-
AND
INVESTMENT IN NEW MANUFACTURING INDUSTRIES 35,00,000/-
Parag,
Since you have realized gains from buying and selling residential properties it will fall under Sec 54. Under this section you do not have any limit on number of property you hold. Considering this yes you should get exemption by investing the gains in a residential property.
Harish,
Whats your query???
dear sir
my father is farmer he received 20 bigha agricultural land (inside muncipality boundary )after property distribution in family he was cultivating that land since 1982 but after family dispute he decide to got that land resisterd on his name in yr 2006 by paying rs 50000 as consideration to his father(by paying rs 10000 yrly from 1997 to 2006) and paying rs 2.26 lacs as stamp duty market value 2260000 then he sold half land 10 bighas in 2011 in 3 parts receving 69 lacs rs in total and invested 20 lacs in plot in 2011 which he got registered in his name in sep 2014 as developer delayed now he decide to do construction worth rs 25 lacs rest 24 lacs is spend on sister marriage and other family affairs Is he is liable to capital gain
Dear Jitendra
Thank you for this article and Question/Answers. I understood the basics.
My father-in-law has sold a residential plot. From this site, I understood that he can claim tax exemption by u/s 54F by investing the money in a residential house. My father-in-law does not own any property now.
My wife and me own our residential house and want to sell the current house and buy big one. I understand that we (my wife and me) will have to claim tax exemption u/s 54.
Can we three (my father-in-law, my wife and me) buy a single house and claim tax exemption under respective sections.
regards
Gopal
Gopal,
In my view it will be difficult to club all three of your capital gains and buy a single house. One of the primary reason is that both fall under different sections and rules for calculating exemption is different under Sec 54F.
Still I am not a tax expert and so don’t know if such option can be allowed by IT. Wiser to consult a tax expert.
Hi,
I have 2 residential properties, one bought in 1996 and another in 2010. Now I am planning to sell both of them and buy 2 other properties using the captial gains that I have made on each.
Will I be able to claim capital gains tax benefit?
Regards,
Debopam
Debopam,
In my view Yes you can if you prove that each property is purchased with capital gains earned from a respective property. Since multiple property purchase for capital gains exemption has been withdrawn now you cannot invest capital gains earned from a residential house into 2 properties.
However, it will be good if you seek a tax expert views considering there has been changes in the concerned section in budget 2014.
Dear Sir,
I went through your Posts, it is a very good job you are doing.
My Query –
1. I had purchased a residential Plot in 2004 and Sold the same plot in 2012. I have reinvested the remaining amount in a Flat after calculating the indexation.
Will this tax exemption needs to be claimed under 54 or 54F.
My other query is in 54 it is mentioned as Residential property…does this also include Plot or only House?
Ravi,
The capital gains exemption in case of plot is claimed under Sec 54F. Sec 54 is only for residential house.
Hello Sir,
We have property which was on the name of my father. My father has given the property to us by will (Vasiyatnama) in 2007. Father expired in 2008.
Till the date we haven’t transferred the bungalow on our name.
Now if we want to sell our inherited bungalow property and we are interested to sell against cheque payment only. In this situation, we need to know that, in context of Long Term Capital Gain that if we transfer our bungalow on the name of all heir / successor and then we sell it, can we get benefit of new residential proper (provided single property is there) + Bond (50 Lacs) + Indexation for every heir ?
If such benefit are available for every individual, are they available if
(i) we transfer the name of all heirs (Jointly for this bungalow & then sell it ? OR
(ii) we make parts of bungalow and then transfer the name of each part on the name of each heir individually & then sell it ?
Total 3 successor are their i.e.
1) Mother
2) Two Brothers
Please guide us.
Thanks & Best Regards,
Sunil Shah
In this article above it is written that on taking exemption under section 54F, one can not sell the new asset purchased (wherein tax exemption is taken) even after completion of 3 years from date of purchase of new asset. I think, it is not so….regards..waiting for your response
S. Bhardwaj,
Yes, you are right. It’s within three years of purchase or construction of new property. Thanks for notifying the error.
Dear Sir/Madam,
We sold a land which was on my mother’s name on june 2015. We are planning to buy a new flat on the name three people, My mother, me and my wife. I will invest all the amount which we got from the sell of land. For extra amount we will also take joint loan on the name of me and my wife.
Is this a right way to get exemption from long term investment gain tax. By what time i need to purchase a new flat considering the date i mentioned. Till now the money i have kept in saving account, is it ok? Please provide answers.
Sir,
i purchased a 200 sqyd plot in 2008…got the possession and conveyance deed in 2009….paid for the enhancement costs from 2009 – 2012.
constructed the house in 3 floors in 2014 and sold it floor wise to different buyers in 2015.
I have computed LTCG n STCG on land and construction seperately.
pls advise on the following:
1. Can i avail LTCG by selling 3 floors. (intend to deposit the money in CGAS only)
2. if i want to reinvest in another residential property then do i need to reinvest only the gains or the whole sale proceeds. As in this case though i have sold residential property but LTCG is availed on land and STCG on construction,
3. if i reinvest the money in land get it constructed within 3 years and hold the house for more than 36 months. Then can i avail LTCG if i again sell that house floor wise?
Regards,
Ashish
Hi Mr. Solanki,
This is to bring to your kind notice, that i sold a residential property in May’2014 and bought a another residential under construction property with the sale money. The new property i bought was a bigger property bought under builders posession linked plan, wherein u pay 50% now and 50% at the time of possession, in an anticipation that i will sell the property before possession and earn profit on it and exit before taking possession, as i dint have money to take the possession. Now as the market is slow, the new property I bought under the builders scheme did not appreciate at all and because of which i decided to sell my property and pay capital gain tax. It is just while i was talking to the builder regarding my issue, he offered to switch me into his other residential project and adjust my 50% down payment into his other project. Now my question is that.
1. Will i still be charged capital gain tax, if the builder switches me into his other project?
2. Will switching into the same builders other project will be considered as a sale or what?
3. Is there any way i can avoid this capital gain tax by switching in the other residential project?
I will be happy if u could help me out on this.
This is to bring to your kind notice, that i sold a residential property in May’2014 and bought a another residential under construction property with the sale money. The new property i bought was a bigger property bought under builders posession linked plan, wherein u pay 50% now and 50% at the time of possession, in an anticipation that i will sell the property before possession and earn profit on it and exit before taking possession, as i dint have money to take the possession. Now as the market is slow, the new property I bought under the builders scheme did not appreciate at all and because of which i decided to sell my property and pay capital gain tax. It is just while i was talking to the builder regarding my issue, he offered to switch me into his other residential project and adjust my 50% down payment into his other project. Now my question is that.
1. Will i still be charged capital gain tax, if the builder switches me into his other project?
2. Will switching into the same builders other project will be considered as a sale or what?
3. Is there any way i can avoid this capital gain tax by switching in the other residential project?
I will be happy if u could help me out on this.
Aman,
Firstly Its a land so capital gains exemption will be under section 54F. You need to purchase a house within 2 years from the date of selling the existing house. With regards to capital gains exemption buying new property jointly with legal heirs is permissible so if your mother buy a new house with you jointly the exemption will be allowed. However I am not very clear on exemption in case of your wife being part owner of this new property. That is allowed in case of capital gains liability between hisband and wife but since the tax liability is on your mother she can buy property jointly with legal heirs. So you will have to get this cleared from a legal expert.
Till the time you purchase a new flat the money shoudl be kept in Captal Gains Savings Account.
Sir awaiting response
I have bought residential (flat)property-‘A’ in 2005-06, And in 2011-12 I purchased another residential (flat) property ‘B’. now I want to sell property ‘A’ & retain property ‘B” and I want to purchase new residence (flat) out of the money received by selling ‘A’, Can I get exemption from capital gain tax out of this transaction? the amount I will be getting is lesser than I am planning to Invest in new one. and I am keeping residence ‘B’ & whether I have to pay TDS or TAN?
Thanks & Regards
Girish Doddamani
Hi,
I have a query regarding capital gain:
1)I have a commercial office
2)one Residential Flat in Fully owned
3) one Residential Flat in CO ownership with my wife
Question 1)Now i am selling my Commercial office in FY 2016-17, can i get exemption in under Section 54F by investing in a residential flat
2) if not then if i sales one commercial office and one Residential flat in financial year, then can i get exemption in 54F by investing in a residential flat.
Please confirm is one to one relation for Sale and investment is necessary to claim exemption under section 54F
Looking forward for the earliest responses.
Puneet,
Capital gains from any asset other than Residential House will fall under Section 54F. Here also you can claim exemption by investing in Residential House but you need to invest the entire proceeds and you should not hold more than one residential property apart from new one which you will be buying i.e. you can hold maximum 2 properties.Now since you have existing ownership in 2 houses you will not be fulfilling this condition once you purchase another one.Yes, in my view, if you sell off one residential property you will be able to claim under sec 54F. But when and how these transactions should be done and whether my views are correct, wiser to seek advice from a tax expert.
Girish,
Since its a residential property there is no restriction in holding n number of properties. So by investing in a new residential property you can easily claim capital gains tax exemption. TDS is applicable on property sale.
Sir awaiting response. Thanks
Puneet,
Firstly the income tax rule says that if you are investing in any under construction residential property then it should gets completed within three years from date of selling existing property. Also, you cannot sell the new property for three years. If you do sell it within this timeframe then the capital gains tax exemption will get reversed and you will be liable for paying the required tax. There is no means where you can avoid this rule.
I (Adult Male) had purchased a house co-owned with my Mother 16 yrs back. Mother is a housewife and never filed Tax return but having PAN. I intend to sell this house and buy a new house (fully self funded) in Self + wife’s name. Wife (now a house wife) is having PAN and not filed return for last 9 yrs since stopped working 9 yrs back. Will I get full benefit of LTCG assuming I do the transactions in the required time period as per section 54. Or will it be apportioned. If apportioned will they split with me and my mother (owners of previous house) or me and my wife ( owners of the new house)?
Amit,
The tax liability will be on the owners of the properties in their ratio of ownership. Since you and your mother owns the property jointly you both will be liable for capital gains tax payment.
You will have to approach a tax expert for details on the amount of tax liability and how to claim exemption on it.
Thank you Mr Solanki. Any idea if my mother relinquishes her rights to me before I sell the property will help?
Amit,
Relinquishment will not avoid capital gains tax. She will still be liable for capital gains tax.
Consult a tax expert to get a clear status on transfer through relinquishment.
thank u very much for ur reply
My mom has purchased plot A inyear 1983 in rupees 40,000. She sold this plot A in april 2013 and got 15 lakhs amount. she deposited this money full 15 lakhs in capital gain account. She failed to re-invest /purchase new property in 3 years. In capital gain account, interest earned is 3 years is around approx. 3 lakhs. so her bank balance is now coming 15+3=18 lakhs. as per indexation, her input cost for maintaining and purchasing plot A is around 7 lakhs.
so her net capital gain is 15-7=8 lakhs,.
(a) DO she need to pay 20% tax on interest part also . i.e 8+3=11 lakhs. tax on 20% of 11 lakhs
(B) she also inherited one plot B 1800 sq ft area from my grandfather in oct 2013. we can complete construction of 500 sq ft area in 1 month. we had also prepared agreement in feb 2016 to construct plot B. can we show this construction for claiming capital gain exemption.
suggest best way to minimise tax.
land purchased in 1984
cost of land : known
construction on such land in 1986
cost of construction : unknown
sale of land plus house in 2016
sale consideration: known
two questions arised
1st: how to calculate ‘cost of acquisition’ if cost of construction is unkown?
2nd: will two different LTCG be calculated? ie one ltcg on sale of land and other ltcg on sale of house since year of acuistion for both land and house are different. if that is so then how will 1st Question be answered ie COA for above two different ltcg(s)
Varun,
It will be difficult for me to answer your query. You need a tax expert to clarify this.
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 has to make house only on his land ?
Hi,
First of all thanks for a great blog!
I have purchased a 2 BHK flat 3 years back which is still under construction. I am now looking to upgrade it to a 3 BHK flat in the same project with the same builder where I pay the differential amount to the builder.
1) Is this transaction treated as ‘sell’ of my 2 BHK flat (to the builder)?
2) If yes, then I believe this is a long term capital gain as 3 years have passed since the date mentioned on allotment letter. Will this be treated under 54 or 54F?
3) If this comes under 54F, then does that mean that if I buy another house then the benefit will be revoked? Or I can buy one more house (apart from the one in question) but not any more?
Abhijit,
1. Any sale of a residential property is covered under Section 54 even if it is under construction.So your property too will be treated under this section.
2. If the under construction completes three-year then it is treated as long-term capital gains.
I sold my capital asset on 19.06.2014 and deposited full Long term
capital gain amount in CGAS account with designated bank before due
date u/s 139(1) and after 2 years from date of transfer i.e. now in
3rd year, can I purchase land and construct house to avail exemption
u/s 54F.
To avail capital gains tax exemption the criteria is that the house should get constructed within three years. So 2 years you have deposited in CGAS account and now one year remains. If you can construct the house within one year you will be able to claim the exemption else it will be denied.
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.
1. If construction is not completed in three years then the capital gains will be taxable. Unfortunately, you cannot avoid it after three years.
2. I am not sure on this. Need to look at some court cases or judgement where after 3 years it is allowed cause the house you bought on loan will be treated as second house and not the one for capital gains tax exemption.
3. Will have to see any court or tribunal judgement on this aspect.
My Father sold House in 2015 which is on his own name and give me whole amount to purchase new flat which is on my name (son). I Purchased flat in Dec 2014 and that amount helps me a lot.
So my question is My father need to Pay Long term Capital gain tax or not? Thanks in advance.
Sandip,
If he has transferred the amount to you then it will be treated as a gift in which case he will be liable for paying capital gains tax. However, in my view, if he has purchased the flat on your name by paying to the seller then there is a probability that he may get exemption since you are a legal heir to his assets.
Check this status with a tax expert as I have answered it within my understanding.
Sir, I have sold land in 2011-12 for Rs. 60 Lakh, i have not filed any ITR as i do not have other specific income. The amount of 60 lakh was invested on : 40 lakh for purchase of another land in the name of you son (Age 37 yrs) and remaining 20 lakh on construction of house in his name (i.e. son). Now, I have received Income tax notice for that amount. Kindly help..
Avtar Singh,
Gains on property are termed as short term if sold before 3 years. Any selling after 3 years of purchase will be treated as long-term capital gains. You are liable to pay long-term capital gains tax which is fixed at 20% with indexation. Since you missed out paying this tax IT Department have sent a notice to you for tax not paid.In my view, you should meet a CA and take further action as he advises you.
My wife got a 26 years old flat as gift from her father. She immediately sold that flat and invested the amount by purchasing a new flat which is jointly owned by me and my wife. Can she avail the tax benefit?
Harigovindan,
Once gifted the flat is in your wife ownership she will now be liable for capital gains tax. So she can save the capital gains tax by investing in a new residential property. In case of joint ownership previous court rulings have allowed the exemptions if the joint owner is a legal heir. The only aspect is that she has invested entire capital gains proceeds in the new flat.
Still, this is my view so do involve a tax expert before you file for exemption.
Dear Sir,
I am Pijush K Saha from kolkata, I wane your guidance about LTCG tax benefit.
My problem stated below….
Currently I have 2 residential flat, one is in my name(purchased in 2008) and other (purchased in 2013) is in joint with my wife.
Now I want to sale my second flat which I brought in 2013. Please suggest can I get tax relaxation under section 54 if I invest the total amount to another Flat or suggest me what should I do.
Property value was in 2013 Rs.1434000
Now in 2016 I sold in Rs. 2325000
Please help..
We have a residential house in the joint names of my wife and I. I had sold a plot in 2013 to fund the house purchase and claimed capital gains exemption. We registered the house in 2015 and have a housing loan against this home. This is the only house we both own. My wife has a couple of other residential plots. Can we sell one of the plots and repay the home loan and claim exemption of capital gains.
Vilaas,
The rule says that you need to purchase the property one year prior or within 2 years after the sale. So if the property is purchased and you have borrowed the money within one year prior to sale then you may claim exemption.
However, this is my view. Good to consult a tax expert.
Pijush,
Since it’s a joint ownership with your spouse you can claim benefit tax benefit only on your share. Your spouse can claim tax benefit on her share of capital gains.In my view you both will be able to claim tax benefit is invested in single property.
since i am not a tax expert get clarification from a good tax consultant.
In the case of joint ownership of property where I understand each of the owners are considered by tax authorities as equal partners and contributors.
At the time of selling and investment of capital gains in bonds, can the two joint owners invest 50 lacs each in the bonds?
May be the joint owners can file their returns separately instead of joint returns to show the capital gains investment.
could you please clarify if this is possible?
thanks and regards
shans
Shans,
In case of joint ownership, the capital gains tax liability is as per the ownership. Yes, it may be considered equal ownership if nothing is specified in the property documents. Since the capital gains tax liability is different both owners will have to file their returns to claim capital gains tax exemption. In my view, both should be able to claim it by investing in capital gains bonds. Still, I am not a tax expert and so you will need a tax expert view to confirm this.
Dear Sir,
I have a situation where i want to sell 25 years old acquired land plot to buy another land plot.
In this case can i claim the tax benefit.
shwetank,
No, you cannot claim exemption on a buying a plot. You will have to purchase a residential property to claim the tax benefit on capital gains arising from selling a land.
I had sold my old house in Aug,2011. My long term capital worked out to Rs 1.07crores. I had booked new flat on 11th July,2011 which was under construction by paying 2lacs as earnest money. Allotment letter Dt 11th July,2011 was issued to me by builder.The total cost of new flat was Rs 1.05 Crores.Sale deed agreement was signed with builder in Dec,2014 i.e Registration of agreement. Balance amount i had paid in instalment till March,15 and got possession of flat in August,15.As per income tax AO i am not entitle for Capital gain benefit as i had paid only 2lacs as initial payment and got allotment letter. Rest i had paid in instalment.Secondly i have done registration of flat in Dec,2014.As per AO Allotment letter would represent only right to purchase a flat. As per AO i will be entitle to own property only after registration of property & stamp duty paid by me and not by mere allotment letter. I had appealled aginst AO order. As on today my case is with Commissioner of IT Appeals. He wants to know whether similar case has gone in favour of assesse in IT Tribunal or in Appelent body or high court or supreme court. Sir, is their any case laws where Assesse had paid initial booking amount of Rs one lac to 5lacs & took allotment letter from builder. Balance amount has been paid in 3 to 4yrs time. Requesting you to help me in quoting cases similar to my case gone in favour of Assesse like me.