How to save tax on long term capital gain from sale of house property


How to save tax on long term capital gain from sale of house property

How to save tax on long term capital gain from sale of house property

We all know that the real estate investment provides good returns over a long term. However during this process we should know how to save tax on long term capital gain from house property sale by looking at various options for tax exemptions.

What is long term capital gain from house property refers to?

If a house property is sold < 3 years from the date of purchase, then, it is short term capital gains. Property sold after 3 years (or 36 months) from date of purchase comes under the long term capital gains. The tax rate on long term capital gain is 20%.

How the long term capital gain from house property is calculated

Long term capital gain is not simply computing the difference between sale value minus purchase value. The value of money ten years back, say Rs 1,000 is not same as today. Hence while arriving capital gains on property sale, the indexation would be done. Indexation is done by computing the past value to present value considering cost inflation year on year. The cost inflation index (CII) needs to be referred to arrive at the present value of the past investments.

E.g. if you have purchased a house property in year 1995 for Rs 10 lakhs and sold for Rs 40 lakhs in 2012, the value of CII in 1995-96 was 281 and 2011-12 is 785. The present value after indexation is 10 lakhs x 785 / 281 = Rs 28 lakhs (approx). The long term capital gain on house property is the difference between the sale value i.e. Rs 40 lakhs minus Rs 28 lakhs = Rs 12 lakhs. Income tax on this would be 20% i.e. Rs. 12 lakhs x 20% = Rs 240,000

How to get exemption on long term capital gain from house property:

1) Buy a new property or construct a new house (Exemption as per Section 54)


If you have sold a house property and have a long term capital gain, you can get exemption by re-investing the amount in a new or another property from the sale proceeds.

  • The exemption can be sought by purchasing the new residential house within a period of one year prior to or two years after transfer of the original house.
  • In case of under construction house, the new construction of house needs to be completed within 3 years from the date of original transfer of house.

I feel this is one of the best methods of getting exemption for long term capital gain from house property sale

2) Open a CGAS

You can open capital gain account with any Government owned bank and deposit the capital gains in this account and file your income tax return before 31st July and save long term capital gain tax.

  • This method is generally used to park the money, till you find a new house.
  • Once you find a new house, withdraw this money and purchase the house any surplus remaining would attract long term capital gain tax.
  • However there is stipulated period for this. You need to buy a new house within 2 years or construct a house in 3 years from the date of transfer of property.

3) Save in 54 EC bonds

In case you are not investing in new property, there is another option to save tax is by investing in bonds as per section 54 EC. These bonds are issued by National Highway Authority of India and Rural Electrification Corporation Ltd. However use this as last option for exemption of long term capital gain from house property sale as the returns would be very low.

  • These bonds are issued for a minimum of Rs 10,000 and in multiples of Rs. 10,000 and the period of investment is 3 years.
  • The maximum amount that can be invested in a financial year is Rs 50 lakhs.
  • If you are investing part of your long term capital gains into these bonds, you would get exemption only to that extent and balance surplus amount would attract tax.
  • The coupon interest rates for such bonds are 6% annually.
  • If you withdraw such bonds before 3 years, you need to pay LTCG tax.

How to save tax on long term capital gain from house property sale

 

Conclusion: Thought investing in real estate is a good long term investment option, while you are selling your house property, try these exemptions to avoid tax for long term capital gains.

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Suresh
myinvestmentideas.com


Article by Suresh

Suresh KP i.e. me have written 400+ articles on this blog. I love doing analysis and identifying the Best investment options.

220 Comments

  1. Anoop says:

    Hello Suresh,

    My father in law is planning to sell his propery and buy a new apartment on his daughters name with that money.

    > Is there any way he can save the long term capital gains tax.

    Thanks

    • Suresh KP says:

      Anoop, There are two transactions. One is selling the property and deriving the capital gains. Since he would not be buying any other property in his name, necessary capital gain tax has to be paid. Second is purchasing the same in daughter name where Gift tax guidelines would apply for daughter as she is in the receiving end. Since “Daughter” falls under “Relative” terminology in IT act, no income tax is payable. 

  2. Aruna Patil says:

    Resp. Sir,

                   we booked 2 BHK flat  before we sell our original 1 bhk flat. we will sell the 1 bhk flat when we reside in new 2 bhk flat. then do we liable to pay capital gain tax?  

    • Suresh KP says:

      Aruna, It does not depend on 1BH or 2 BHK. 1) Indexed value of old house in the year of selling it 2) Cost of new flat. Both should happen one after other and any differential value would fall under capital gains and necessary capital gains tax needs to be paid.

  3. Hameed says:

    Dear Suresh,

     

    I have booked the aprtment in december,2012  and will be handedover only in March, 2015 and sold my old apartment in october 2013.As per the capital gains rules the foloowing is being noted:

    Section 54: Old Asset: Residential Property, New Asset: Residential

    Property

    Under Section 54 – Any Long Term Capital Gain, arising to an Individual or HUF, from the Sale of a Residential

    Property (whether Self-Occupied or on Rent) shall be exempt to the extent such capital gains is invested in the

    1. Purchase of another Residential Property within 1 year before or 2 years after the due date of transfer of the

    Property sold and/or

    2. Construction of Residential house Property within a period of 3 years from the date of acquisition

    Provided that the new Residential House Property purchased or constructed is not transferred within a period of 3

    years from the date of acquisition

    If the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing

    the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital

    gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain.

    Quantum of Deduction under Section 54

    Can you pleas clarify my doubt?

    Regards,

    Hameed

    • Suresh KP says:

      Hameed, You have indicated the capital gain exemption clause, but I could not see any question. Can you pls post your question ?

      • Hameed says:

        Dear Suresh,

        Dear Suresh,   I have booked the aprtment in december,2012  and will be handedover only in March, 2015 and sold my old apartment in october 2013.As per the capital gains rules the foloowing is being noted: Section 54: Old Asset: Residential Property, New Asset: Residential Property Under Section 54 – Any Long Term Capital Gain, [...]

        My Question:I booked flat for rs 83 lac in December 2012 and sold my old flat in October, 2013 for rs 53 lac.I want to know about capital gains?.

        Regards,

        Hameed

         

         

  4. All says:

    I m selling an old family building to a builder. The total consideration I am getting is Rs. 5cr  plus multiple flats in the new building that the builder will construct on my sold plot. My quiry is do I have to pay property gain tax on the value of falts in the new building that will be constructed on the sold plot?

  5. Amit Jivani says:

    I had bought a property in 2002 for rs 550000 & sold the same in 2013 April for 42 lakhs out of which I prepaid 2 lakhs to clear my loan outstanding & balance I have put ad fixed deposits in capital gain tax.

    due to some reasons I need to withdraw approx 5 lakhs

    what is the procedure and how pls advice

    • Suresh KP says:

      Amit, You can with draw such amount, but you need to pay long term capital gain tax in the financial year in which you are withdrawing.

      • amit says:

        Thanx for your prompt reply
        But in my case I have deposited the full payment received from the sale of property and capital gains will be lesser so then also do I need to pay tax?

        I hope u understand what I m trying to say

  6. Nilesh says:

    Sir,

    I have purchased flat in Jun2010 and registered it. I paid all dues by dec 13 and took possession. I sold flat in same month dec 13. Now gain will be considered as short term gain or long term gain. if long term, please provide RBI/IT reference site. Reason: I want to apply for zero % TDS as I am re-investing entire sale amount into another property in india. But tax officer says its short term gain and he cant issue TDS for sale.

    • Suresh says:

      Hi Nilesh, Here is the guidelines from IT website. Page no. 15 and 16 can provide clarity about this. Any house sold after 36 months is long term capital gain. http://incometaxindia.gov.in/Archive/HowtoComputeyourCapitalGains_18062012.pdf

  7. Rajani Manjunath says:

    Dear Sir,

    In year 2005, one of the big builders in Bangalore lanuched a resedntial project and a 2bhk was sold for Rs. 38 lakhs. 

    I bought a 2bhk flat in resale while the property was still under construction  from the 1st buyer in year 2006 by paying additional premium in cash of 10 lakhs to the 1st buyer by making a tripartiate assignment agreement between the builder, myself and the 1st buyer.

    The builder was supposed to handover the property in year 2008 and I had cleared all the installments by 2008 and only remaning amount of about 7.5lakhs was pending which was supposed to paid during posession. The builder gave the posession of flat in 2010 after obtaining posession certificate from concerned authorities, but I took the posession of the flat only in 2013 from the builder. 
    Now, I am planning to sell the flat which is worth about 1.1 crore. 
    I have not registered the flat as of today and want to sell it without registering it. 

    As per some people, the property doesn't have to be regiestred to claim long term capital gains tax. Also, I am planning to invest the money in another property.
    Can I claim long term capital gains tax as this property was bought in 2006, but cleated all payments in 2008 and the builder got the posession certificate in 2010. 
     
    Your response to my query would be very much appreciated.

    Regards,
    Rajani

    • Suresh says:

      Hi Rajani, I don’t think you can sell the flat as is without any registration. How the other buy can pay you money on your name without transfer of property from your name to buyer name. Coming to money part, as long as you show this income as long term capital gain tax and deposit the money in LTCG account and use it for new property purchase, I don’t think there should be any issue. You should be able to prove that this money has come from selling the property. 

      • Rajani says:

        Sir,

        Your quick response is very much appreicated.

        I am planning to sell it to another buyer by paying the tranfer fees to the builder and the builder will inturn will transfer the rights of the property from my name to another new buyer thorugh another tripartiate assignment agreement. The earlier tripartiate assignment agreement will get cancelled and later the new buyer can get it registered in his name from the builder.

        I am already claiming tax benefits for the housing loan. Since the property is not registered in my name (only assignment agreement in my name from earlier buyer and builder – year 2006), can I claim LTCG via indexation or should I claim without indexation ? I can not show the 10lakhs which I paid premium as I paid that amount in cash and the agreement value is only 38 lakhs. I am planning to buy another plot and construct the house this year itself after selling this property and adding some additional amount. 

        Builder started to handover the property in 2010 after getting OC, but I took posession only in mid 2013 and as of today, property is not being used.

        Thanks in advance for your response.

        Regards,

        Rajani.

  8. Ravikumar says:

    I bought a residential site for a considereation of 16 lakhs in 2008 availing Bank loan. I plan to sell this property for 43 lakhs.   From the sale proceeds I plan to repay the loans of about 12 lakhs (Bank loan of Rs 6,.5 Lakhs and personal loan of Rs 5.5 Lakhs)

    With the remaining amount, i plan to buy a house costing 90 lakhs by availing Bank loan of Rs 60 Lakhs and PF savings of Rs 10 Lakhs.

    Want to know, whether I have to pay any capital gain tax

     

    • Louis says:

      Greetings Mr. Suresh, 

      Sir,
      We have brought a flat in Mumbai in Jan 1999 purchased for registered value 7.5 lac in both husband / wife names, now I want to sell it and getting some sizable amount say 1CR what will be the situation where as tax LTCG etc.

      Sir please give us you valued advise how about to go. We have also brought a flat underconstruction in July 2011 on HDFC loan, can I repay my loan for this and also awail tax reduction for LTCG for the old flat we are selling.

      Louis
      Regards, Thanks 

      • Suresh says:

        Louis, If we do indexation from 1999 to 2014, your cost of Rs 7.5 Lakhs would hve a value of Rs 11.14 Lakhs. So, if you sell the flat for Rs 1 Crore, you would have a capital gain of Rs 88.8 Lakhs. As per my knowledge, you cannot repay for existing loan which was taken 2 years back. You should invest this money in the items specified in the article. 

  9. V L Natarajan says:

    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 or 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 reply.

    Regards,

    V.L.Natarajan

  10. Vimal says:

    I have sold a flat (Mumbai) after holding for 3years. To save long term tax –

    1) Can I use the money to re-pay the loan taken for this flat ( Mumbai)?

    2) Can I use the money to re-pay the loan taken for another flat (Bangalore) within last year?

    3) Can I use the money to return the money borrowed (personal) to buy flat (Bangalore)?

    Your reply will be much appreciated. And also if you have any more suggestions?

     

    • Suresh says:

      Vimal, First is you should know what your capital gains are.e.g if you have purchased for 10 Lakhs and with indexation after 3 years it should have been Rs 12 lakhs. Now you sold the flat for Rs 15 Lakhs, 3 Lakhs is profit. Now none of the above 3 items indicated would provide you any tax benefit. You should follow the process I indicated in article to get any tax exemption. You can buy new property or deposit in capital gain account for some time before you buy property or invest in capital gain tax bonds to get any exemption

  11. srikanth says:

    dear sir,

    i purchased a land of area 642 sqyrds in the year 1984 for rs 60000/- as per documents,and i constructed 3 independent houses in the year 1987,1996,and 2011 respectively.now iam selling the total area including houses for rs 6500000/-as per the present govt market value.actually iam sellin for 16000000/-.but as per documents the total amount iam receiving is 6500000/-.i have 3 sons and 1 married daughter,i want to spend 4000000/- on the new house immediately and i want to make fixed deposit of 2500000/- on my wifes name and distribute the remaining amount to my childern.please suggest me in detail how to efficiently distribute the remaining amount to my childern by reducing capital gains.

     

    regards

    • Hameed.Md says:

      Dear Suresh,

      I have booked a flat for Rs.84 lacs in December,2012 and sold my old flat (2001 registered) in October,2013 for 52.5 lac.Can I get any discounts in capital gains and also to know the procedure. 

       

      • Suresh KP says:

        Hameed, These are two different transactions. 1) You have purchased a flat in Dec-2012 (Apr-2012 to Mar-13 is financial year period). 2) You have sold old fat in Oct-2013 (Apr-13 to Mar-14) period. Here your second transaction, you need to show capital gain and pay necessary tax. The proceedings should be used to buy a new flat within a period or invest in CGAC and get exemption. 

  12. KGP Reddy says:

    Dear Suresh,

    Thanks for your humble services to tax payers community.

    I bought a residential house in Bangalore during Apr 2014, 1/3 of it is self occupied and 2/3 is rented out , this is my first property and purchased under bank loan , I have declared a rental income as other income for the year 2013-14, while my 80 C coverage is more than a lac , i have no opportunity to claim tax rebate for repayment of prinicipal amount against loan, however i have been suggested to  claim full interest paid to bank under tax rebate for 2014. i need your help in understanding 2 following questions.

    1. Whether am i right in claiming full tax rebate after declaring 100 % interest paid to bank towards bank loan because it is self occupied / let out property.

    2. I have taken some hand loans from relatives and friends to pay 20% amount to the seller in acquiring the property, how do i show interest part of these hand loans being paid by me to avail tax benefits for 2013-14.

    Thanks for your kind response.

    KGP Reddy

     

    • Suresh KP says:

      Hi Reddy, 1) Yes you can claim 100% interest amount up to the limit specified and claim this as self-occupied property. In case you are going for second housing loan, then you need to declare only one as self occupied and other as let-out, hence I don’t see any issue here 2) You cannot show any interest payment as deduction except for housing loan. It could be personal loan or hand loan, it cannot be shown. To come out of this, you can take top-up loans from bank and pay of this hand loans and claim the amount officially as interest up to the limit available

      • KGP Reddy says:

        Dear Suresh,

        Thanks for your clear response,going by your clarification, i feel i should have been more clear in my question, the scenario is interest paid to bank for the year 2013-14 is more than 1.5 lacs and bank loan is more than >30 lacs and i am claiming 100 % interest tax rebate as a let out property ( partially occupied by me too)which is over 1.5 lacs, pl clarify is this the right thing to do, one of the CA/Tax consultant initially suggested this to me. Thanks once again for your great help.

        • Suresh KP says:

          KGP, Here are the options available 1) Consider this as self-owned property. The maximum limit would be Rs 1.50 Lakhs of interest limit on housing loan 2) Declare as let out property and claim entire interest as exemption irrespective of limit, but show a rental income, get exemption also for municipal tax and standard deduction from such rental income income. Second option works out well when you have very high interest rate to be claimed as exemption. Hence your CA/Tax consultant suggested this way.

  13. chopra says:

    Please suggest me"

    My father-in-law gifted me a property in 2008(bought in my name only in 2008) worth 30lacs for my future security due to my husband's a lot of bad habbits. But I sold that property in distressed sale at 29lacs in 2009 for up bringing and studies of my both children. And i (with my both children) seprated with my husband without divorce after selling property. My husband is having other properties in crores.Do I have to pay any kind of tax for that money?

    • Suresh says:

      Hi Ms. Chopra, Sorry to hear about your story. Though while taking this as gift, you may not need to pay tax, but since you sold this property, the sale consideration would be treated as long term capital gain and you need to pay tax appropriately. My suggestion is pls consult a tax auditor in your area who can provide next steps to pay tax as this pertains to 3 years back and you may even need to penalty.

  14. Chetan Kamble says:

    Hi Suresh

    First of all wish u and ur family a happy and prosperous diwali.

    Could you please guide me on below scenario?

    I had purchased a plot in 2010 for 17 lac (5 lac cash payment + 12 lac loan). Now in 2014, I am planning to construct 3 storey apartment (approx construction cost is 30 lac). So I will be taking 30 lac loan. Out of these 3 floors I am planning to sell 1st floor (expected price 30 lac). And repay the loan. other 2 floors will be used by
    me. So to summarise
    1. Total investment : 47 lac
    2. Total Loan : 42 lac
    3. Total loan repayment : 30 lac

    Is there any kind of tax I need to pay in this whole exercise?

    Thanks,
    Chetan

    • Suresh says:

      Hi Chetan, I am not able to answer this query as it involves partial selling and I do not want to give partial feedback. Request you to consult a tax consultant.

  15. Goyal says:

    I have sold the property in september 2013. I have capital gain 0f 50 lakh. I also booked an apartment in 2010 which is in under Construction. I will get the posseion in 2014 and registry will happen same time. So can i claim exemption under section 54. So my query is

    As per income tax act, I have to constrct house within 3 year, but I have booked apartment in 2010 and sold apartment in 2013, so can i claim for exemption? Please help me.

  16. Amit Bhayani says:

    Sir I have purchase a flat in nov 2010 under construction of 55lc + 4 lc registration charges total cost is 59 in which I paid 34 lc frm myside n 14 lcloan n abt 10 lc balance amt to paid in installnent which bank ll pay .
    Now if I sale flat in dec 2013 in 1cr 10lc n buy another flat for 80lc how much capital gain I ll get as still building is under construction as in my knowledge I need only to invest profit in house . 1 thing more flat is in 3 name n new flat ll b also in same 3 name. Can u help me out in elobarte manner.

  17. VIKRANT says:

    Hi suresh, What's your opinion for Reliance Tax Saver Fund ?  

  18. ajoy says:

    dear suresh 

    i bought a residential plot jointly with my wife in 1993 but did not construct. the agreement made says residential plot with house thereupon of one square brick with mangalore tiles but there isnt one in reality. two questions (1)  can i sell and reinvest full proceeds u/s 54 in a multi storey apartment i purchased two months ago. i own 2 already. the property reflects in my balance sheet alone. no specific share mentioned in the agreement. (2) can ltcg be shared?

    • Suresh says:

      Ajoy, If you go as per documents 1) Yes, but it should be in your wife name as the earlier house was in your name 2) As per my knowledge LTCG cannot be shared

  19. Muks says:

    Hi Suresh

    I have got 80 lakhs from the sale of an property that was bought in 2002 for 10 lakhs. Based on the calculation capital gain tax,is coming to around 14 lakhs.

    I have looked at buying the following:

    - 4 plots of 2400 sqft each (40 lakhs)

    - Construction of house (1500 sqft) in the above 4 plots – (20 lakhs)

    - 4 acres of agricultural land (10 lakhs)

    Could you please clarify if all the three investments can be eligible for exemption of LTCG?

    Thanks

    Muks

    • Suresh says:

      Hi Muks, Capital gains from sale of property can be set-off only against purchase of property. e.g. plots or agriculture lands are not allowed. If you are planning to buy a plot and going to construct within 2 years, this would be exempted from capital gain tax to the extent which you are using for purchase + construction cost.

  20. Naresh says:

    I want to sell the property purchased in aug.2005 in the name of three persons. Now I want to sell it in 2013 and want to purchase another property in the name of three same persons. Is this will be valid tranction to save capital gain

  21. lalu says:

    I have purchased a land for 2 lakhs during the year 1990 and sold it to my uncle for Rs.8 lakh in the year 2002 under an agreement made between us. The amount used for children education. Now (2013)the land formaly registered in the name of my uncle. Present value as shown in the registary is 20 lakh but I got only 8 lakh during 2002. At that time I was not a tax payer. whether the agreement of 2002 is valid for tax exemption.The agreement was in stamp paper but not registered. Whether I have to show this transaction in my ITR and what steps I have to be taken.

    • Suresh says:

      Hi Lalu, You need to account under IT for the amount received in your bank account of Rs 8L in 2002. Hence it is immaterial when you made the agreement or registered. Your Rs 2L investment would have been Rs 5.20 Lakhs as per cost inflation index. Means if you received Rs 8L as return, Rs 1.80 L is your long term capital gain. Since you have not paid the LTCG tax in 2002, ideally you should pay tax along with interest for last 11 years which would be huge amount (2% per month). You may consult a tax advisor in your area in case you want to proceed further.

  22. V. SURESH says:

    Sold House Property for 45 Lacs & used the money for business purposes. The LTCG arising out of this transaction amounts to 35 Lacs. In the same year purchased another house property for 45 Lacs by availing housing loan of 40 Lacs. Can I claim the deduction for re-investment in house property?

    • Suresh says:

      Hi Suresh, If the LTCG is Rs 35L, you should have invested this amount in buying new property to claim the deduction. Since only Rs 5L is used, you can claim only this amount as deduction and Rs 30L is taxable.

  23. vivek says:

    Dear suresh

    I have bought an flat in under cibstruction scheme in march 2010. Now the flat possesion will be expected by 2014 end and registry will happen at that time.

    Since it has been 3+ years can I sell it and take IT exemption as long term gain calculation as you suggested?

    • Suresh says:

      Vivek, Do you want to sell your flat to get IT exemption. I could not understand. I have indicated that if you sell any flat, you need to invest in another residential property within 2 years and within 3 years you need to construct a house. Looks this is mis-understood. Please inform in case my understanding is incorrect.

    • Vasu says:

      Hi Suresh, I purchased a flat in Year 2000 and sold it now for Rs 30 Lacs. Need information on the following

      1. If I decide not to re-invest in flat or house again, what is the tax amount I need to pay now to IT Dept 

      • Suresh says:

        Vasu, You have not provided what is the cost price. As per indexation chart of 2001-01, it is 406, Current financial indexation chart is 939. Means you should multiply your cost price with 939 and divide with 406. What ever amount you would get is your indexed cost price. e.g. if you purchased for Rs 10L. You should do 10L x 939/406=20 Lakhs (approx). If you have sold it for Rs 30L, your capital gain is Rs 10L (Rs 30 minus Rs 20L). You need to pay 20% as capital gain tax which would be Rs 2L

        • Vasu says:

          Hi Suresh, I purchased the flat for Rs 8.0 Lacs. But do not have a proper consolidated bill for the said amount except the Sale deed agreement (which would be at Govt. Guideline value and less than the price for which I purchased). Is there a way to get the bills now through an auditor ?

          • Suresh says:

            Hi Vasu, As per my knowledge, you cannot go for a certiifcation from auditors for bills. Your sale deed + any other bills which you can show which are used for flat can only be considered.

  24. Digvijay says:

    I have a flat which I bought in June 2010 for 50L and it is still under construction (80% paid). I have booked another flat in Nov 2012 which is under construction (allotment done in Jan 2013). I have paid  30% till now and construction have started. I am planning to sell my earlier flat for 80L and please advice if I can use the proceeds/profit (30L) into my new booked flat and save tax.

    • Suresh says:

      Digvinay, You can do that. As per IT act, residential property sale proceed capital gains has to be investd in another residential property (not land) to get exemption. You should do that before the deadline or else deposit amount in CGAS account

  25. amit singh says:

    Dear Suresh

    I have one 20 years old residencial plot and now i am getting 1.6 crore for that plot.

    plz suggest how much amount i have to take in w/b ratio and i am also intresting in investing property buying after selling that plot.So plz suggest how much amount should i take in w/b and how much amount i have to invest in property after getting money to safe tax .

    waiting 4 ur reply

    • Suresh says:

      When you said w/b I hope you are referring black and white. The capital gain amount is computed based on the inflation index chart. In which year you have purchased the plot ? Based on this capital gain amount to be computed on which you need to pay tax.

      • amit singh says:

        SIR

        I HAVE PURCHANGED IT IN 1993 SO PLZ HELP ME TO TELL ME HOW CAN I TAKE MONEY IN BLACK AND WHITE . I HAVE PLANNING TO BUY PROPERTY AFTER SELLING THE MONEY.SO I WANT TO KNOW HOW CAN I SAVE TAX AND MONEY AMOUNT TO TAKE IN WHITE OR BLACK .PLZ HELP

        • Suresh says:

          Amit, Difficult question. Take entire amount in white and invest whole money in new property. Everything becomes white and no further janjhat.

        • Deepak says:

          Hi Sir, i bought a flat in 2004, one in 2006 and another in 2011. I sold first flat. I know that LTCG cannot be exempted by investing in buying another property. Am I correct? can I save the LTCG by investing in government bonds. Or do I need to invest full amount of sale deed in government bonds.

          please advise ASAP. 

          Regards

          • Suresh says:

            Deepak, You can buy another residential property to save tax within time limit. There are no restrictions about number of properties. However wealth tax may apply if you have multiple properties. You can invest in government bonds or CGAS account and get interest on your capital gains. Check the article it would provide details about where you can invest.

  26. Kumar says:

    Sir,

    I have already booked a new under construction flat during July 2013 and paid advance of 40% (40 lacs) from my bank account. I am planning to sell my 7 years old flat within one year period and would like to adjust the capital gains (may be 35 lacs) against the newly booked flat advance amount without opening CGAS account. Is this adjustment allowed ?

  27. n s sapra says:

    sir,my mother bought a house for 20000 in 1981 and sold the same in 2013 for 2350000.what is the capital gain? to save the tax she wants to buy the REC BONDS with her two sons as nominees.Bond forms allow only one nominee.Can she file two applications with REC?

    sapra

    • Suresh says:

      Hi Sapra, In 1981 the cost inflation index is 100 and in 2013 the cost of inflation index is 852. For Rs 20,000 purhcase in 1981, the equivalent inflation index would be Rs 20,000 / 100 x 852 = Rs 170,400. If your mother has sold property for Rs 23,50,000, then capital gain would be Rs 21,79,600. You need to pay tax on this. You can consider taking multiple REC bonds with different nominees.

  28. Mushahid ali khan says:

    Sir I have sold my property for Rs 40 Lacs in Aug 2013.. Construction was made in 2003. To save long term capital gain tax can I invest 20 lacs in Bonds Of NHAI and R.E.C and 20 lacs for buying a property ?. Please clarify. Every where I find that the amount can be invested in buying or constructing of  a enw property or for purchase of NHAI . and REC bonds . Please clarify. 

    M.A.Khan

    • Suresh says:

      Hi Khan, If your query is whether you can buy property and invest balance capital gain in Bonds, the answer is YES. You can invest balance capital gain amount in these bonds. 

  29. rbajaj01 says:

    Hi, I am purchasing a flat for 45 lac through a home loan. Also I will get 50 lacs from sale of a land in next six months which will attract long term capital gain tax. To save on this long term tax, can I pay the home loan amount in full to get benefit of exemption from paying tax on long term capital gain. Pl reply

  30. lokesh says:

    hi suresh

    I purchased a flat in 2002-3 at 5 lacs and sold same in 2013-14 at 22 lacs against a home loan.
    In 2011-12 I purchased a flat at 25 lacs(registry value) with a 25 lacs loan with an annual interest+principle outgo of 3.43 lacs pa.

    my queries are ;
    1. Can i show nil capital gain tax adjusting the capital gain against my earlier purchase.
    2. If not, can I adjust my loan outgo against the capital gain

    3. If I invest this balance in buying a new flat.

    a.can I do this in next 2 years

    b. only the indexed difference liable for capital gain tax has to be invested in buying a new property.

    Please help

  31. Sukesh Phatak says:

    Dear Suresh,

    Suppose if I am having 2 residential properties. And I sold the One in which I am not residing. Can I claim the exemption if I purchase new residential property within 1 year?? My question is,  if we want to claim such exemtion, is there any conditions, that we should stay in that property which is sold ? Somewhere I heard that we cannot claim exemption if we were not residing in the sold property and we can claim only if we were residing in the concerned property for minimum of 2 years.

    Please reply

    • Suresh says:

      Hi Sukesh, There are no such restrictions. You can invest in another property by selling your second house. However you should do that within the permissible time, else you should atleast deposit amount in Capital gain account and use it within 2 years. 

  32. Deepak says:

    Dear Suresh,

    I have a property in joint name with my wife and now plan to sell it. The gains qualifies for short term captial gains (as it was held for less than 3 years). As I understand the tax rate will be applied as per the income tax slabs.

    Query: As it is jointly held property, would the gains be split between me and my wife and the tax be paid accordingly as per our individual tax slabs applicable? 

     

    Thanks in advance.

    Regards,

    Deepak

     

    • Suresh says:

      Hi Deepak, Yes the capital gain amount need to split between wife and husband and should be added to your income and income tax would be paid as per income tax slab. Is the percentage of share of property indicated in property document? If yes, the capital gains also would get split into same proportion.

  33. jitender kaur says:

    Dear sir,my mother is 89.My brother bought a house in 1981 for 18000 with initial money 4721 and monthly instalments of 133 for 13 years.He died in 1984.She approached the court for transfer of property in her name in 2009 and got it in 2o11.She paid 10230 /as outstanding amount .Thus total payment of Rs 36050 stands paid.The said property was transferred in her name by Housing Board  in 3/12.The said  house stands sold in 8/13 for 23.50 lakh.What is the tax liability?Long term or short term?Can she save the tax?She affixes thumb for transactions.

    Jitender

     

  34. Anitha says:

    Dear Mr.Suresh,

    The facts are as follows:

    Sale of plot in Aug' 2011

    Investment in CGAS in July' 2012

    Amt of LTCG- Rs.25 lacs

    Now, we are looking at finalising a flat under construction. The builder will ask us to pay for the UDS value first which would amount to a value lesser than the LTCG to be invested, say Rs.10 lacs.

    My queries are:

    1. Will this amount of Rs.10 lacs amount to investment of LTCG? If not, what should I do with the difference of Rs.15 lacs that needs to be invested?

    2. Irrespective of the first query, will the completion of construction ie 3 years stil hold good, because I am looking at investing in a mega project which would involve construction of multi-storeys, so the time involved could be more or less.

    3. By when at the latest, should I have this amount of LTCG invested?

    Kindly explain.

    • Suresh says:

      Anitha, Your flat should be registed to get exemption. 1) If you paid Rs 15L, you can deposit balance of RS 10L in capital gain account till you pay the amount to builder and use it up to 2 years for purchase and 3 years for construction 2) If you exceed this period, you need to pay tax on LTCG amount. 3) As indicated in artilce, you should invest in capital gain account before filing the IT return by 31-Jul

  35. V L Natarajan says:

    Dear sir,

    I sold my plot in Bangalore in Nov,2012,which was bought in 1996.

    I have opend Capital gain account in a public sector bank and deposited capital gain amount.

    I am planning to 1)buy our ancestral house from my brothers and sisters and also 2) construct another house in a plot which I own with the proceeds of capital gain. Also, I would be spending money for major renovation of our ancestral house

    Can I claim tax exemption for these two properties and also for renovation of my ancestral house?

    Also, after these properties are acquired, if still I am left with some capital gain amount, can I invest balance amount in REC or NHAI bond?   

    Request your comments.

    • Suresh says:

      Natarajan, You can invest in multiple properties. Any surplus still left out would be treated as long term capital gain. Yes you can invest in REC or NHAI bond to get exemption.

      • V L Natarajan says:

        Dear sir,

        Please let me know the time limit in which we have to utilise capital gain amount in 

        a) in buying a ready house

        b) in construction of new house in a plot.

        Awaiting your reply.

        Regards,

        V.L.Natarajan,Bangalore. 

  36. Kumar says:

    Sir,

    I have sold my property ( residential flat ) in Pune during the year May 2010 and subsequently purchased another residential flat under construction during July 2010 to cover my long term capital gains. I paid the amount of capital gains in installments within 2 years .still the registration of my flat is not done as the possession is delayed and they have promised to register in Oct 2014.Given this situation am I exempted from tax on long term capital gains.

    • Suresh says:

      Kumar, You would get exemption up to 2 years only for purchasing and 3 years for construction of property. Since this period is over, you would not get benefit. Please consult tax professional in your area so quickly check the tax liability. You should have foreced the builder to do registration in your name.

  37. naresh says:

    sir ,I had bought a property in sep  2009, as per construction link plan in 35 lac , Now I am getting 75 lac of this property and I have paid only 16 lac to the compny ,Means  I am getting 59 lac in hand.and same time I am buying another property in 90 lac . I want to know that can I take full paymen(t 59 lac )in white and same I paid to the another party , is ther any I-tax liabilities. If at all how best can i make this deal . please guide me immd.

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