Section 54F

1. Invested Rs. 30 Lakhs on Under construction house from own funds in the financial year 2015-16.
2. Selling a plot with a Long term Capital Gain of Rs. 55 lakhs in March 2016.
3. About to invest a minimum of Rs. 25 lakhs more in the under construction house.
4. Investment Prior to Selling of Plot = 30 Lakh + Investment after selling the plot = 25 lakh totals 55 lakh.
5. Do I need to pay any tax now.
Asked 9 months ago in Capital Gains Tax from Raipur, Chhattisgarh
Hello Sir, I think you have invested whole amount of capital and claim deduction u/s 54F. Hence, there should not be a liability.
Bhagyashree Kankaria
CA, Pune
26 Answers
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  Talk to Bhagyashree Kankaria
Dear Sir, 

Amount invested in under construction house before selling the plot will not be considered as eligible investment for the purpose of section 54F.

Further, if you want to exempt entire capital gain taxes, you have to invest entire sale proceeds ( not the value of capital gain) within 3 years from the date of sale in under construction property. (not before transfer of plot).

It is important to note here that purchase of house can be before 1 year from the date of sale...however construction of house has to be after sale of plot.

please refer below:
Any long term capital gain arising on the sale of any long term Assets other than a residential house property shall be exempted in full if the entire sale consideration of such sale is invested in-

1. Construction of a residential house within 3 Years from the date of such transfer (Sale consideration should be invested in construction of only one residential house property).

2. Purchase of residential house property within 1 year before or 2 year after the date of such transfer( Sales consideration should be invested in Purchase of only one residential house).
Abhishek Dugar
CA, Mumbai
766 Answers
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  Talk to Abhishek Dugar
The existing provisions contained in sub-section (1) of section 54, inter alia, provide that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Act.

The existing provisions contained in sub-section (1) of section 54F, inter alia, provide that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house 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.

Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
  Talk to Shyam Sunder Modani
Dear Sir,

1. Please provide the Sale proceeds from the Sale of Land/ Plot as that is the amount which is to be invested for purchase/ construction of House Property and not the Capital Gains.

2. In this case your investment of Rs.30 Lacs will not be considered as it took place before sale of plot (assumed). So technically you can claim a benefit of only Rs.25 Lacs which you are planning to make in due course.

3. In order to save up on Taxes you can invest the balance amount in Long Term Capital Gain Tax saving Bonds upto a maximum of Rs.50 Lacs only.

Trust this clarifies your query. 

Feel free to get back/ call back for any further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
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