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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Hi Pankaj ji,
My parents have bought two 1bhks next to each other.
One of them will be completing 3 years in coming march and
other will complete only 1.5 year. We plan to show minimum profit in white on second &
include its profit on first house so that LTCG can help reduce taxes.
Wanted to know if we can take a new house on my name and show it as gift OR
it has to be in joint name of my parent and myself.
If under joint name, after how many years can it be changed to just my name ?
@Sham
Generally, Investment in new house property has to be done by same person who has got gains. However there have been incidents where people have claimed for purchase done by their children/wife and won cases in court.
Thanks for Pankaji.
Can it be a property taken jointly in that case ?
Can my parents buy a new property with my name added in it as first holder ?
@Sham
Yes, property can be purchased in joint ownership and your name can be added as first holder.
Hello sir
my dad owned two property one is flat and other is banglow. Flat is for investment purpose . So not to have short term capital gain we sell it after 3 years. But now we get profit of Rs 800,000 on same, that increase our income tax.
so can u suggest as now our profit showing between 1200000 to 1400000.
@Suraj
In order to save tax on long term gains, you can either invest into another residential house property u/s 54 or buy capital gain bonds u/s 54EC.
i sold two residential plots in 2011 and got rs 30 lakh after holding the plots for more than 3 years. and then bought a flat worth 60 lakh by taking 30 lakh loan in 2011.the flat is still not ready for possesion which is likely only in 2017. now i want to sell this flat
in 2015 jan, after holding it for more than 3 years- can i reinvest this money into any other flat.
i also have a society flat booked but possesion might be given by march 2015.
please advice how to get relief
@Happy
1. As possession for flat was not done within two years of plot sale, gains from plot sale in 2011 would become taxable.
2. You can save tax on capital gains from under construction flat, if sale consideration amount is invested into another house property. But you should not be owning more than one residential house property at the time of sale u/s 54F.
Sir, My wife has sold a house in February, 14 and the capital gain earned out of it was invested towards payment of installment for a new house in April, 14. While filing IT return for AS 2014-15 she has not given the details of this capital gain and capital purchase as well but has postponed it for filling in the next year return. Now a notice have been received from IT. Our intention was not malafied bcoz at the time of filling we were confused because the capital gain was earned in AS 2014-15 and the new purchase was in the AS year 2015-16. We already owe a house of our own where we are residing.
@Vinod
As capital gains was earned in AY 2014-15, either possession of new house property was to be taken before 31st July 2014 or amount needs to be invested into capital gain scheme account before 31st July 2014 and same should have been reported in ITR.
Now you have no option but to explain your case to assessing officer to get it cleared.
Dear Sir,
You are requested to answer my queries on Capital Gain Tax Exemption.
Details :
I own a flat in Mumbai. I purchased it in 1971. I am going to sell this flat in March 2015.
In this transaction there will be Capital Gain of Rs. 1 Crore. If I invest in March 2015 Rs.50 Lacs out of this sell in REC bond, I will be able to avail exemption wide section 54EC.
Question 1
Can I get additional 54EC exemption if I invest again in April 2015 Rs. 50 Lacs in NHAI bonds. Thus totaling exemption of Rs. 1 Crore from Capital Gain ?.
Condition of Section 54EC will be fulfilled since my second investment is before 6 months from the date of sell. At the same time second investment is in not in same financial year.
Question 2
Is it necessary that the balance Rs.50 Lacs have to be kept in Capital Gains Bank Account, after first purchase of bonds till second purchase of bonds ?.
Question 3
Even if the said flat was on my name only, can I add my wife’s name as joint holder in 54EC bonds ?.
Regards,
Anant Date
@Anant
1. Yes, you can do it.
2. Not necessary, if whole capital gains is invested before 31st July, 2015 (before return filing).
3. Yes, you can invest in joint names.
Dear Sir,
Thank you very much for the reply.
Regards,
Anant Date
Dear Pankaj ji,
Isnt the total investment limit under 54 CG bonds 50 lakhs? You answered this question before budget came out. Is that the reason why you said 1 cr?
I have a flat and booked another flat in 2010 december under Construction plan. It is under contruction till today and payment has been done 95% in 2013. If today I sell ( more than 3 years) this under construction flat ;
1. I shall get LTCG.
2. Can I invest LTCG in another flat
@Harish
It would be long term gain from a capital asset (no residential house property) in case possession is not taken yet.
You can save income tax under section 54F, by investing into another residential house property.
Have sold a residential plot. The transaction has resulted in capital loss. Kindly advice as to how the consideration received would be treated.
@Suresh
You can declare this loss in income tax return and in case any capital gain is there it can be adjusted against that.
In case there is no capital gains this year, capital loss can be carried forward to next year so that it can be adjusted later.
Dear Sir, My brother just sold his 3 Non agricultural plots at a consideration value of Rs 78 lacs total in August 2014. The sale deeds are registered and he has recfeived full payment. He had a long term capital gain of Rs 61 lacs from this sale however he transfered this 78 lacs amount to my father's account from whom he has availaed loan for his business. Now he has no money physically as well as in bank account. My father passed away in December 2014. My query is - What is his tax liability in this case? Please suggest how to save the LTCG tax? If at all he has to invest full consideration of 78 lacs, he is not ready to block the entire 78 lacs in purchaing new property or buying low interest capital gain bonds . Any option you can please suggest?
@Pankaj
In case he wish to save tax fully, there is no other option but to block whole sale consideration.
If he invests a lower amount, the tax would be chargeable proportionally.
Dear Sir. Thanks for your advise. I have further query on this. Since he has already transfered the whole consideration to my father who in turn gifted that amount to my sister, can he borrow a home loan and invest equivalent of the sale consideration amount in purchase of new flat? Or do you suggest borrwing from friends and relatives to buy the new property for avoiding capital gain tax. Please advise.
Yes, he can buy property on loan and still save tax on long term gains.
i sold a plot for 25 lacs which i purchased for 2 lacs in 2005 .iwant to invest this amount in a newly started project . how much time will i be allowed to get possession as the project may take more then 3 years to compleat
@S.L.Agarwal
You need to get possession within three years from sale of plot.
I sold residential land in Bangalore North for Rs.1,15,00,000 [ One crore and fIFTEEN lAKHS] IN January 2015. This land was bought for Rs.44,00,000/- [Forty Four Lakhs] in December 2011. I want to reinvest this entire money in buying a flat/apartment. How do I get exemption from Capital Gains tax and how much time do I have to make this reinvestment ? What are relevant IT sections in this regard, for further reading ?
Kindly Advise. Thanks, Raj.
@Krishnaraj
You save tax u/s 54F. If you invest whole sale consideration into residential house property, then there won't be any tax payable.
Possession of new property should be taken within three years from land sale.
If possession of new property is not taken before last date of income tax return filing, unused amount has to be deposited to capital gain scheme account.