Buying and Selling of Property, Plots, Flats, Land, Independent Houses, Floors or any other form of residential property is a frequent activity in present scenario. Especially with so much activity in the real estate sector, it has been considered to have given good returns. The attractive home loan schemes have made it even more lucrative. However, the transactions are often subject to complicated income tax structure. Here is one case that may solve some of your queries.
When you are about to sell a piece of land for a profit, it is quite likely that Capital Gains Tax would be imposed in the form of Long Term Capital Gain (LTCG). This remains a concern for a lot of people that how can they possibly avoid Capital Gains Tax arising out of the Long Term Capital Gain. In the present article we are discussing an example case.
In the present case the example assessee, an individual, is in the process of transferring a long term capital asset not amounting to a residential house and the proceeds are to be utilised to buy a capital asset amounting to residential house.
The treatment of capital gain on the transfer of capital asset not amounting to residential property is under consideration. Section 54F of the Income tax Act 1961 deals with the current situation.
Where the assessee is an individual, and capital gain arises from the transfer of any long term capital asset (not being a residential house) which in the present case is a piece of land (not amounting to agricultural land) and the assessee has within a period of one year before or after the date on which the transfer of the original asset has taken place, has purchased a residential house (new asset) or has constructed a residential house within three years; the capital gain shall be dealt as per the following conditions:
However, the capital gains exemption enumerated in (a) & (b) above is subject to the some conditions. The benefits as discussed shall not be available if:
If you have further queries on the subject of tax related queries, the experts in the panel would be happy to help you with sound tax advice.
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i received rs 16 lac for sale of plot and spent rs 17 lac on purchase of new plot as per circle rate . i have spent more than what i received .now what is the minimum construction which i must do to save LTCG TAX . A HOUSE IS AFTER ALL A HOUSE WHETHER IT IS A BANGLOW OR A SINGLE ROOM
@S.L.Agarwal
You can also construct a single room set and get occupation/completion certificate.
MY HIGHEST GTATITUDE FOR REPLYING EVERY QUERY . KINDLY TELL FROM WHOM THE CERTIFICATE IS TO BE TAKEN
@S.L.Agarwal
local municipal corporation should provide you such certificate.
Many many thanks Mr. BATRA for your expert advice . now i understand that i will have to construct a house with in 3 years from purchase of plot to save LTCG TAX . if i get a better plot in future can i construct house on it after selling the plot which i just purchsed and cost of NEW plot is Rs17 lac or more .
@S.L.Agarwal
You should open capital gain scheme account if construction is not completed before last date of return filing for year in which old property was sold.
Unless you claimed exemption for a property, you can sell and buy any other property.
I SURE WANT TAX EXEMPTION .my query was if i get a better plot in future say after a year and sell this plot for 19 lacs and purchase another plot say for rs 20 lacs and construct house with in remaining two years will i save L.T.C.G. TAX.? MY son is also having a plot which he purchased before 9 years . if he sells his plot say for rs 15 lacs and i use his rs 15 lacs in construction of my house will he also save L.T.C.G.TAX AS ALL AMOUNT RECEIVED FROM SALE OF BOTH PLOTS HAS BEEN USED IN PURCHASE OF LAND AND CONSTRUTION OF NEW HOUSE
@S.L.Agarwal
If you sell the plot against which capital gain exemption is taken, assessing officer may deny tax benefit.
Regarding second query, yes, you and your son can construct combined house from capital gain amounts and save tax.
Hi Pankaj,
My mother had purchased a residential property (old) in 2008 for 8,00,000. Me and my mother jointly purchased another residential property (new) for 98,00,000 in Jan 2014. We then sold the old property for 28,00,000 in June.
We then used the amount we received to repay the loan we had taken to buy the new property.
Is my mother liable for LTCG tax on the sale of the old property or can we get exemption?
Can you please suggest.
@YR Jangid
As your mother bought a new residential house property within one year before sale of old property with an amount more than capital gains, she does not need to pay any income tax on capital gains. This would be under section 54.
capital gain calculed on both plots are to be used on purchase of new plot and construting house on it or whole amount received from sale of both plots is to be used
@S.L.Agarwal
If plot is kept for less than 3 years, it would be short term gain and there is no tax exemption available for such gain.
both plots were purchased in 2005 .my query was whether whole amount received by selling of both plots is to be used in purchase of new plot and constrution of house or only LTCG amount is to be used
@S.L.Agarwal
Yes, sale consideration from both plots can be used to construct a single house and still tax benefit can be taken u/s 54F.
Sir, I have purchase residential plot of Rs.13,50,000/- on April 2006, and sold it for Rs.47,00,000/- in July 2014. I have deposited the Rs. 47 lakhs in my Personal saving account.
- What will be time limit to open LTCG bank account?
- I would like to by agricultural land, can I invest the whole amount or part of that amount?
- How can I save tax?
Thanks,
Pushpendra
@Pushpendra
Your query already answered here: http://www.socialfinance.in/questions/5184/purchase-agriculture-land-on-sale-of-residential-plot
suppose i utilise the whole amount received from selling of both plots i.e. 32 lacs to construct a house with in 3 years . can i sell this house after 3 years i.e. just after compleation . what will be my tax liability if i sell this house say for rs 45 lacs
@S.L.Agarwal
If you sell your house within three years after completion, tax benefits u/s 54F would be taken back.
Dear Pankaj jI, Ibought an under construction flat in Nov 2006 In Rs. 38 lakhs. It was completed in May 2010 I got it registered In May 2010 itself. In the registry the 'sale consideration' value is mentioned as 38 lakhs but govt circle rate value mentioned is 56 lakhs. The stamp duty paid by me was on the circle rate value (56lakhs). Now I am planning to sell this property in near future. Could you please let me know if the long term capital gain will be calculated on 38 lakhs or 56lakhs? Regards,Sameer
@Sameer
Purchase cost would be considered as 56 lakhs.