• Capital Gains to be used to pay off housing loan

I purchased a residential house in Kerala with 16 cents in 2008. In March 2017, I signed agreement for purchase of a flat in Bengaluru availing housing loan. The construction is expected to be completed in December 2018. I have an outstanding balance of 59 lakhs in the loan. Based on the computation that you have provided, I understand, I will have significant capital gains. My plan is to sell the residential house and use the capital gain to pay off part of my loan. But the sale of residential house may happen only in 2019 end or 2020 as market conditions are not good. My question is: if I sell the house in Kerala by end of 2019, can the capital gains arising out of the sale be used to pay off part of the loan for flat or will it not be exempted as I purchased the flat in March 2017? Thank you for your help.
Asked 11 months ago in Capital Gains Tax from Saudi Arabia

There is no exemption available for repayment of housing loan from capital gain. To avail exemption you need to invest either in house property or bonds.

Period of exemption starts from the date of sale and not from the date of purchase.

Vivek Kumar Arora
CA, Delhi
2130 Answers
91 Consultations

5.0 on 5.0

No, You will not be eligible for exemption from capital gain by paying off the loan of the property purchased in 2017 because for exemption property should either be purchased before one year of the sale or within two year of the sale.

Alternatively, you can invest in REC/NHAI bonds or in another residential property to save tax.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar


Abhishek Dugar
CA, Mumbai
3576 Answers
168 Consultations

5.0 on 5.0


The exemption will not be available.

The exemption is provided only when a residential house property is purchased before 1 year or after 2 years of the sale of the property.

Mere repayment of old loan shall not provide exemption from capital gain.

You may invest in 54EC bonds to claim exemption or the old property could be sold off within 1 year of allotment of the new property.

Lakshita Bhandari
CA, Mumbai
2694 Answers
107 Consultations

5.0 on 5.0


You will not be eligible for any exemption as to be eligible for the same, you need to invest in a residential house property within one year before or two years after the transfer of the house property. Also mere repayment of housing loan does not qualify for any exemptions. you may consider investing in specified Bonds to avail exemption u/s 54 EC.

Hope that clarifies,



Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

No ,capital gain amount can not be used for housing loan repayment..To claim exemption you have to invest in property or bonds.

Swati Agrawal
CA, Indore
928 Answers
3 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA