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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Sir !! I had a old house which i got from my father on 1963 and i demolished it before selling without having proper knowledge of tax benefit and now it became a vacantlandtax and I m going to sell it..want to know how can I save capital gain tax from that property and I have no plan of purchasing another property or constructing a house...kindly provide info for reducing capital gain tax
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
Dear sir,
I have sold a plot on 31.03.2016 for Rs. 22, 40,000, which was purchased in 2011 for Rs. 8,50,000. On calculation, arround Rs. 9,00,000 would be the LTCG tax.
Last year during Nov'2015, I have entered in to a MOM with a builder for purchase of a flat for Rs. 62,00,000, for which I have already paid Rs. 24,80,000 as initial payment. This initial payment of Rs. 24,80,000 was made with personal loan from a bank & loans from relatives.
Now, wish to repay all these loans from the proceeds of this property sale.
In this case, what would be my tax burden? Is it "zero" ?
kindly explain me.
With best regards,
Ramesh S
I have only one daugther and I need around 25lacks for her higher (medical) education I am trying in India from last two years but we can't getting admission in India because of open category. Now I am trying to admission in abroad. My question is can I sale my property and use my money 50% for dauther education and 50% in residencial property? (I was alloted property from Mhada in 1992-93. apprx. cost that time around 50k to 100k and now i sale for 40 lacs) Can I use sale amount without any tax to my daughter education
I had purchased plot in 2002 and in 2011 to 2013 I had developed it in 6 flat, completion certificate was obtained in March 2014. 1 flat sold in march 2015, 3 flat in march 2016 and 2 in august 2016.
Can I get exemption under sec. 54 for considering the sale of residential house apportuent to land.", which was developed nd gave on rent for 2 months.
sir, my mother planned to buy a house she didn't have any assets(plot,house). so my father wanted to gift deed to my mother of his 6 year old purchased residential plot(site) by him. my father already own a house in his name. afterwards my mother sale the property gifted by my father and buy a house for that amount in her name obtained by sale transaction, shall she should pay LTCG(long term capital gain) tax? or my father should pay?. she is going to purchase first residential house.she is working as gov. teacher and tax payer.sir please answer me as early as possible.
Hi Pankaj,
I have sold my residential house and wanted to invest in a residential plot, once i buy the plot i will go for construction.. Am i eligible for capital gain tax savings? Please let me know..
Thanks,
I sold my residential plot during April 2017 for Rs.33 Lakh. I’m planning to buy another plot for Rs.55 Lakh by using Rs.25 Lakh out of Rs.33 Lakh.Remaining 30 Lakh (55-25), I’m planning to take loan. Please let me know whether I have to pay capital gains tax in this scenario.
@Amar
In case you construct a residential house property on the new plot, you can avail tax benefits under section 54F.
However this would only be applicable if you only have maximum one residential house property in your name before this property.
i purchased a plot in 2005 for rs 1 lac sold it for rs 8 lac in 2014 and purchased another plot for rs 9 lac . how do i save L .T C. G. TAX if i have construction cost 10 lacs.
@Amar
If plot was sold in 2014, you should have constructed a residential house property on the new plot within 3 years of earlier plot sale, in order to avail tax benefit.
Dear Mr. Pankaj Batraji,
Your article and replies are exhaustive and highly informative but I need to know my query as it is not covered above threads. I have a property in Delhi measuring about 250sq yd. I am intending to sale a part of it and build a house on the rest of the area (by demolishing the old structure fully).
The plot was bought in 1971 & the house was built in 1985 (no proofs/receipts of expenses on construction is available with me now). My queries are:
1. How will the LTCG be affected and will I get any benefits for this construction?
2. What proof does the IT dept need for the new construction part(as the same builder will do both i.e. buy, register his part and construct new for the same amount, no money being given or taken)?
I hope you will resolve my issue and advise as early as possible since your all advice are quite exhaustive and prompt in guiding in resolving LTCG issue. If possible kindly email the response or inform when the reply is put on your blog. I am a senior citizen, if that is relevant. Thanks.
With best regards,
Dr. Goswamy
@Dr. Goswamy
As per section 54/54F, if gains/sale consideration are used in acquiring/constructing a new residential house property, then tax benefit can be taken.
First, part of land should be sold to builder and sale amount should be transferred and shown in transfer deed.
Now, amount towards construction cost should be transferred to builder and receipts should be taken.
Thanks, Pankajji for you timely reply.
Dr. Goswamy